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What was your average annual rate of return

Question 1. The time value of money concept rests on which of the following principles?

a. a dollar today is worth more than a dollar in the future

b. A dollar in the future is worth more than a dollar today

c. a dollar is always worth the same amount

d. time is money

e. a dollar should be spent immediately to get the most value

Question 2. In a rare moment of generosity, you give your nephew $100 on his first birthday. Your nephew's mother, however, knows the time value of money, so she invests the money in a 20-year 7% CD. (At maturity the CD pays back the principal plus accumulated interest at 7% a year.) If your nephew cashes in the CD at maturity, how much will he receive?

a. $107

b. $358

c. $387

d. $2,140

Question 3. In November 1998 you bought 100 shares of Microsoft stock for $35.375 a share. In November 2000, hearing about an unfavorable ruling against Microsoft by a Federal judge, you sold your stock for $92.5625 a share. What was your average annual rate of return on your Microsoft investment? (disregard dividends and commissions)

a. 262%

b. 62%

c. 585%

d. 1.6%

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## Q : Stock market at an expected return

Every year for the next 30 years you plan to save 10 percent of your salary and invest it in the stock market at an expected return of 9 percent per year.