An investment of $2,300 grows to $2,904 in 4 years. The annually compounded rate of return is:
Answer(s): A
Let r be the annually compounded rate. Then, 2904 = 2300*(1+r)^4. Hence, r = (2904/2300)^(1/4) - 1 = 6%
Assume the least squares equation is Y' = 10 + 20X. What does the value of 10 in the equation indicate?
Answer(s): C
The regression is written as Y' = a + bX. The letter "a" is the Y intercept and b is the slope of the line. Y' is the predicted value of Y given a specific value of X. Here a=10.
What quarterly payment would you have to make to pay off a $5,000 debt in 7 years, assuming the first payment is made 3 months from today and interest accrues at 6% per year, compounded quarterly?
On the BAII Plus, press 28 N, 6 divide 4 = I/Y, 5000 PV, 0 FV, CPT PMT. On the HP12C, press 28 n, 6 ENTER 4 divide i, 5000 PV, 0 FV, PMT. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1. The value of "N" is set to 28 since there are 28 quarters in 7 years (7 x 4 =28).
If you deposit $1,202.50 into an account paying 6% per year simple interest, how much interest will you have earned in 2 years?
Answer(s): E
Since this is a simple interest question, the formula is I=PRT, with T here being 2, since the timeframe is 2 years. On the BAII Plus, press 1202.50 x 0.06 x 2 = to see the answer. On the HP12C, press 1202.50 ENTER 0.06 x 2 x to see the answer. Since the question asks for the amount of interest earned, the original deposit should not be added to this value.
In a large metropolitan area, past records revealed that 30 percent of all the high school graduates go to college. From 20 graduates selected at random, what is the probability that exactly 8 will go to college?
This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r!(n-r)!.Here n = 20, r = 8,p = 0.3 and q = 0.7. Therefore we have 20!(0.3^8)(0.7^12)/8!12! = 0.114.
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