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FIN 306 Week 2 Quiz 2 | Questions and Answers | 2026 Update |
Graded A+ Exam 2026-2027 BANK QUESTIONS WITH
DETAILED VERIFIED ANSWERS EXAM QUESTIONS WILL
COME FROM HERE (100% CORRECT ANSWERS A+ GRADED
1. What is the primary reason a dollar received today is worth more
than a dollar received one year from now?
A. Inflation always increases the value of future dollars.
B. The dollar received today can be invested and earn interest over the
year.
C. Future dollars are physically lighter in weight.
D. Banks require higher minimum balances on future deposits.
Answer: B
Explanation: The time value of money principle states that funds
available now can be invested to generate positive returns, making
them worth more than the same nominal amount received in the
future.
2. You deposit $5,000 today into an account earning 6% annual
interest. How much will you have after 4 years?
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A. $5,636.48
B. $6,200.00
C. $6,312.38
D. $5,954.24
Answer: C
Explanation: Future Value = $5,000 × (1.06)^4 = $5,000 × 1.262477 =
$6,312.38.
3. What is the present value of $25,000 to be received in 10 years if the
discount rate is 5%?
A. $12,782.59
B. $15,347.83
C. $16,288.95
D. $13,889.50
Answer: B
Explanation: PV = $25,000 / (1.05)^10 = $25,.628895 =
$15,347.83.
4. If an investment promises to triple your money in 12 years, what
approximate annual rate of return does it offer?
A. 8.33%
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B. 9.59%
C. 25.00%
D. 12.50%
Answer: B
Explanation: Using FV = PV(1+r)^n, 3 = (1+r)^12. Taking the 12th root,
3^(1/12) = 1.0959, so r ≈ 9.59%.
5. An ordinary annuity pays $1,000 at the end of each year for 5 years.
If the discount rate is 8%, what is the present value?
A. $3,992.71
B. $4,312.13
C. $5,000.00
D. $3,582.16
Answer: A
Explanation: PV of ordinary annuity = $1,000 × [(1 - 1.08^-5) / 0.08] =
$1,000 × 3.99271 = $3,992.71.
6. What distinguishes an annuity due from an ordinary annuity?
A. An annuity due has infinite payments.
B. Payments for an annuity due occur at the beginning of each period.
C. An ordinary annuity grows at a constant rate.
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D. Annuity due payments are tax-exempt.
Answer: B
Explanation: An annuity due makes payments at the start of each
period, while an ordinary annuity pays at the end. This one-period shift
affects present and future value calculations.
7. You want to have $100,000 in 15 years for your child's education. If
you can earn 7% annually, how much must you deposit today?
A. $27,500.00
B. $36,244.60
C. $38,745.90
D. $25,841.70
Answer: B
Explanation: PV = $100,000 / (1.07)^15 = $100,.759032 =
$36,244.60.
8. A perpetuity pays $500 per year forever. If the required rate of
return is 4%, what is its present value?
A. $20,000
B. $12,500
C. $10,000
FIN 306 Week 2 Quiz 2 | Questions and Answers | 2026 Update |
Graded A+ Exam 2026-2027 BANK QUESTIONS WITH
DETAILED VERIFIED ANSWERS EXAM QUESTIONS WILL
COME FROM HERE (100% CORRECT ANSWERS A+ GRADED
1. What is the primary reason a dollar received today is worth more
than a dollar received one year from now?
A. Inflation always increases the value of future dollars.
B. The dollar received today can be invested and earn interest over the
year.
C. Future dollars are physically lighter in weight.
D. Banks require higher minimum balances on future deposits.
Answer: B
Explanation: The time value of money principle states that funds
available now can be invested to generate positive returns, making
them worth more than the same nominal amount received in the
future.
2. You deposit $5,000 today into an account earning 6% annual
interest. How much will you have after 4 years?
,2|Page
A. $5,636.48
B. $6,200.00
C. $6,312.38
D. $5,954.24
Answer: C
Explanation: Future Value = $5,000 × (1.06)^4 = $5,000 × 1.262477 =
$6,312.38.
3. What is the present value of $25,000 to be received in 10 years if the
discount rate is 5%?
A. $12,782.59
B. $15,347.83
C. $16,288.95
D. $13,889.50
Answer: B
Explanation: PV = $25,000 / (1.05)^10 = $25,.628895 =
$15,347.83.
4. If an investment promises to triple your money in 12 years, what
approximate annual rate of return does it offer?
A. 8.33%
,3|Page
B. 9.59%
C. 25.00%
D. 12.50%
Answer: B
Explanation: Using FV = PV(1+r)^n, 3 = (1+r)^12. Taking the 12th root,
3^(1/12) = 1.0959, so r ≈ 9.59%.
5. An ordinary annuity pays $1,000 at the end of each year for 5 years.
If the discount rate is 8%, what is the present value?
A. $3,992.71
B. $4,312.13
C. $5,000.00
D. $3,582.16
Answer: A
Explanation: PV of ordinary annuity = $1,000 × [(1 - 1.08^-5) / 0.08] =
$1,000 × 3.99271 = $3,992.71.
6. What distinguishes an annuity due from an ordinary annuity?
A. An annuity due has infinite payments.
B. Payments for an annuity due occur at the beginning of each period.
C. An ordinary annuity grows at a constant rate.
, 4|Page
D. Annuity due payments are tax-exempt.
Answer: B
Explanation: An annuity due makes payments at the start of each
period, while an ordinary annuity pays at the end. This one-period shift
affects present and future value calculations.
7. You want to have $100,000 in 15 years for your child's education. If
you can earn 7% annually, how much must you deposit today?
A. $27,500.00
B. $36,244.60
C. $38,745.90
D. $25,841.70
Answer: B
Explanation: PV = $100,000 / (1.07)^15 = $100,.759032 =
$36,244.60.
8. A perpetuity pays $500 per year forever. If the required rate of
return is 4%, what is its present value?
A. $20,000
B. $12,500
C. $10,000
