# CPCU 410 Module 8 Test Bank

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1. Which of the following formulas would be used to determine the future value of a principal sum?

2. Jack has a \$30,000 lump sum to invest today. Assuming a compound annual interest rate of 6%, what is the future value of this amount in five years?

3. Andy has a \$4,000 lump sum to invest today. Assuming a compound annual interest rate of 4%, what is the future value of this amount in 20 years?

4. To what amount will \$3,000 grow in seven years in a savings account that earns 4% interest compounded monthly?

5. Theresa borrows \$1,000 for six months. The interest rate is 12% simple interest per year. At the end of six months, the amount Theresa needs to pay off the loan plus interest is:

6. To what amount will \$20,000 grow in five years in a certificate of deposit that earns 7% interest compounded quarterly?

7. Which one of the following statements is correct regarding interest rates?

8. All other factors being equal, an increase in the frequency of compounding will result in all the following EXCEPT:

9. A savings account pays a monthly stated rate of 1% of the account balance. The effective annual interest rate of this savings account is:

10. Which of the following is the effective annual interest rate for a 4% nominal rate that is compounded semi-annually?