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MBA Finance Simple and Compound Interest — practice questions

Explore 30 free Simple and Compound Interest questions in MBA Finance Financial Management. Open each question or exercise to read its content, reference answers and available explanation.

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Simple and Compound Interest questions and exercises with answers

Showing questions 1–30 of 30.

The idea that money available now is worth more than the same amount later is the:Read the answer and worked solution →A friend puts 1,000 in an account paying 4% a year. After one year the balance is:Read the answer and worked solution →Leaving that same money for a second year at 4% gives a balance of:Read the answer and worked solution →The extra 1.60 earned in that second year is interest on:Read the answer and worked solution →Interest earned in later periods on interest already earned is called:Read the answer and worked solution →A person deposits 300 in an account paying 5% a year. After one year they have:Read the answer and worked solution →A company earning 2.50 per share sees a 10% rise the next year. New earnings per share are:Read the answer and worked solution →A shop raising a 50 rupee item by 3% next year will price it at:Read the answer and worked solution →The value a present sum grows to at a future date is called its:Read the answer and worked solution →The value today of a sum to be received later is called its:Read the answer and worked solution →The interest rate used to bring a future cash flow back to today is called the:Read the answer and worked solution →Bringing a future amount back into today's rupees is described as the exact opposite of:Read the answer and worked solution →A house listed at 400,000 today, with prices rising 4% a year for six years, needs which calculation?Read the answer and worked solution →A shortcut that estimates how long money takes to double is the:Read the answer and worked solution →Using that shortcut, savings earning 9% a year will take about how long to double?Read the answer and worked solution →Using the same shortcut at 6% a year, money doubles in about:Read the answer and worked solution →Using it at 12% a year, money doubles in about:Read the answer and worked solution →When compounding happens more often within a year, the interest income is received:Read the answer and worked solution →Because of that, 200 at a given rate compounded quarterly rather than annually will grow to:Read the answer and worked solution →A single one-time receipt or payment of cash is described as a:Read the answer and worked solution →The time value of money is linked to inflation because rising prices:Read the answer and worked solution →Someone seeking the highest interest rate available should remember that investments are usually:Read the answer and worked solution →Catch the money-over-time wordsRead the answer and worked solution →Pop the doubling timesRead the answer and worked solution →Run the value gatesRead the answer and worked solution →Slice the finance wordsRead the answer and worked solution →Forward or backwardRead the answer and worked solution →Sort the growth resultsRead the answer and worked solution →Type the numberRead the answer and worked solution →Time value bingoRead the answer and worked solution →

Worked practice questions

The idea that money available now is worth more than the same amount later is the:

  1. Time value of money
  2. Trade value of money
  3. Total value of money
  4. Term value of money
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Correct answer: A. Time value of money

1. Money on hand can be invested. 2. It earns interest while it waits. 3. That is the time value of money. _Source: OpenStax Principles of Finance 2e, Chapter 7, Time Value of Money I._

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A friend puts 1,000 in an account paying 4% a year. After one year the balance is:

  1. 1,080
  2. 1,040
  3. 1,004
  4. 1,400
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Correct answer: B. 1,040

1. Four per cent of 1,000 is 40. 2. Add that to the original 1,000. 3. The balance is 1,040. _Source: OpenStax Principles of Finance 2e, Chapter 7, Time Value of Money I._

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Leaving that same money for a second year at 4% gives a balance of:

  1. 1,081.60
  2. 1,080.00
  3. 1,084.00
  4. 1,076.00
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Correct answer: A. 1,081.60

1. The second year earns on 1,040, not 1,000. 2. That gives 41.60 of interest. 3. The balance is 1,081.60. _Source: OpenStax Principles of Finance 2e, Chapter 7, Time Value of Money I._

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