How much will you have in an account two years from now if you start with $100 in it today and add $300 to it one year from now? Assume that interest is 6% per year, compounded annually.
Answer(s): A
Solve this question by working 2 compound interest problems. On the BAII Plus, press 2 N, 6 I/Y, 100 PV, 0 PMT, CPT FV, which yields $112.36. Then press STO 1. Then press 1 N, 300 PV, CPT FV, which yields $318.00. To find the answer, press + RCL 1 =. On the HP12C, press 2 n, 6 i, 100 PV, 0 PMT, FV. Then press STO 1. Then press 1 n, 300 PV, FV. Then press RCL 1 + to show the answer.
A sample of single persons receiving social security payments revealed these monthly benefits: $826, $699, $1,087, $880, $839 and $965. How many observations are below the median?
Answer(s): B
Order the sample: 699, 826, 839, 880, 965, 1087. The median is somewhere between 839 and 880. So there are three observations below the median.
What annual interest rate, compounded annually, is equivalent to 5% per year, compounded quarterly?
Questions of this type are illustrating the concept of an Effective Interest Rate, which is a rate compounded annually that has the same effect as a rate compounded more often than one time a year. As such, a depositor or a creditor is indifferent between them, since they have the same effect. To solve this question, make any deposit and see how much is in the account after one year. The ratio of the ending FV to the beginning PV will indicate the annual rate earned. On the BAII Plus, press 4 N, 5 divide 4 = I/Y, 100 PV, 0 PMT, CPT FV. On the HP12C, press 4 n, 5 ENTER 4 divide i, 100 PV, 0 PMT, FV. The number displayed will be 105.09. In other words, after one year, $100 has become $105.09. An interest rate of 5.09%, compounded annually, would cause a $100 deposit to become $105.09 in one year. Choosing an initial deposit of $100 helps a great deal in these situations. Make sure the BAII Plus has the value of P/Y set to 1.
If you deposit $204.50 into an account paying 3.15% per year simple interest, how much interest will be earned after 3 years?
The question only asks for the earned interest, not the total amount in the account. On the BAII Plus, press 204.50 x 0.0315 x 3 = to see the answer. On the HP12C, press 204.50 ENTER 0.0315 x 3 x to see the answer.
In a management trainee program, 80 percent of the trainees are female, 20 percent male. Ninety percent of the females attended college, 78 percent of the males attended college. A management trainee is selected at random. What is the probability that the person selected is a female who did not attend college?
Answer(s): D
Prob. of choosing a female=0.8. Prob. of a female not attending college = 0.1. So 0.8*0.1 = 0.08.
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