Question 1

What is the future value of $200 invested today for the next 3 years if the interest rate is 1 percent?

Accepted Answer

A) $200 
B) $216.06 
C) $206.06 
D) $212.06 
E) None of the above. 
A) $200 
B) $216.06 
C) $206.06 
D) $212.06 
E) None of the above. C

Question 2

You own savings of $400,000 that grows at a nominal rate of 6% annually.What are the real and nominal dollars you will have today and at the end of each of the next seven years if the inflation rate is 2.5%?

Accepted Answer

The real and nominal dollars that you have earn time period are as follows:

Question 3

The formula for future value is:

Accepted Answer

A) FV = PV1+)n   
B) FV = PV / 1+)n   
C) FV = PV1 / 1+)n)   
D) FV = 1 / PV)1+)n   
E) None of the above. 
A) FV = PV1+)n   
B) FV = PV / 1+)n   
C) FV = PV1 / 1+)n)   
D) FV = 1 / PV)1+)n   
E) None of the above. A

Question 4

Consider an annuity that pays $45,768 at the end of very year for the next 12 years.What is the value of the annuity at the end of the 12 year period if the discount rate is 2%?

Accepted Answer

A) $600,280.65 
B) $612,637.43 
C) $598,300.32 
D) $200,250.23 
E) $3,450,322.32 
A) $600,280.65 
B) $612,637.43 
C) $598,300.32 
D) $200,250.23 
E) $3,450,322.32

Question 5

The formula for present value is:

Accepted Answer

A) PV = FV1+i)n 
B) PV = FV1+n)i 
C) PV = FV / 1+n)i 
D) PV = FV / 1+i)n 
E) None of the above. 
A) PV = FV1+i)n 
B) PV = FV1+n)i 
C) PV = FV / 1+n)i 
D) PV = FV / 1+i)n 
E) None of the above.

Question 6

If the value of the principal today is $2000 and the interest rate is 12.33%,what is the total simple interest income at the end of three years?

Accepted Answer

A) $2,739.80 
B) $739.80 
C) $2,657.30 
D) $787.21 
E) None of the above. 
A) $2,739.80 
B) $739.80 
C) $2,657.30 
D) $787.21 
E) None of the above.

Question 7

Paul has promised to pay Lucy $25,500 in seven years if she gives him $10,000 today.What discount rate is Paul using?

Accepted Answer

A) 12.45% 
B) 13.54% 
C) 14.31% 
D) 15.45% 
E) 10.43% 
A) 12.45% 
B) 13.54% 
C) 14.31% 
D) 15.45% 
E) 10.43%

Question 8

What is the real return?

Accepted Answer

A) The after-tax return on assets. 
B) The pre-tax return on assets. 
C) The inflation-adjusted return on assets. 
D) The interest-adjusted return on assets. 
E) None of the above. 
A) The after-tax return on assets. 
B) The pre-tax return on assets. 
C) The inflation-adjusted return on assets. 
D) The interest-adjusted return on assets. 
E) None of the above.

Question 9

David is interested in an investment that would supply him with $200 at the end of year 1,$300 at the end of year 2,$400 at the end of year 3,$500 at the end of year 4,and $1,600 at the end of year 5.How much should David pay for this investment if he wants to earn 10 percent on his investment? How does you answer change if he wants to earn 5%?

Accepted Answer

David should pay $2,065.26 is

Question 10

What is an annuity due?

Accepted Answer

A) An annuity where the payments are made at the end of each period. 
B) An annuity where the payments are made at the beginning of each period. 
C) An annuity where if a payment is missed,it must be paid within one period or the investment is seized. 
D) An annuity where if a payment is missed,it must be paid immediately or the investment is seized. 
E) None of the above. 
A) An annuity where the payments are made at the end of each period. 
B) An annuity where the payments are made at the beginning of each period. 
C) An annuity where if a payment is missed,it must be paid within one period or the investment is seized. 
D) An annuity where if a payment is missed,it must be paid immediately or the investment is seized. 
E) None of the above.

Question 11

What is the rule of 72?

Accepted Answer

A) Individuals over the age of 72 should invest in fixed-income securities exclusively. 
B) Investments double in value once every 72 compounding periods. 
C) The time until investments double in value is equal to the annual interest rate divided by 72. 
D) The time until investments double in value is equal to 72 divided by the annual interest rate. 
E) None of the above. 
A) Individuals over the age of 72 should invest in fixed-income securities exclusively. 
B) Investments double in value once every 72 compounding periods. 
C) The time until investments double in value is equal to the annual interest rate divided by 72. 
D) The time until investments double in value is equal to 72 divided by the annual interest rate. 
E) None of the above.

Question 12

The future value of a sum is a function of:

Accepted Answer

A) The amount invested at the beginning of the period. 
B) The interest rate. 
C) The number of compounding periods. 
D) All of the above. 
E) None of the above. 
A) The amount invested at the beginning of the period. 
B) The interest rate. 
C) The number of compounding periods. 
D) All of the above. 
E) None of the above.

Question 13

The time value of money is best defined as:

Accepted Answer

A) The compensation provided for investing money for a given period. 
B) The concept that investing is always superior to consumption. 
C) The concept that the value of the exchange rate varies over time. 
D) The compensation provided for carefully timing one's investments. 
E) None of the above. 
A) The compensation provided for investing money for a given period. 
B) The concept that investing is always superior to consumption. 
C) The concept that the value of the exchange rate varies over time. 
D) The compensation provided for carefully timing one's investments. 
E) None of the above.

Question 14

If the value of the principal today is $1,560,250 and the interest rate is 11.25%,what is the total compounding contribution at the end of ten years?

Accepted Answer

A) $1,215,472.15 
B) $1,560,250 
C) $0 
D) $2,430,966.30 
E) None of the above. 
A) $1,215,472.15 
B) $1,560,250 
C) $0 
D) $2,430,966.30 
E) None of the above.

Question 15

If the value of the principal today is $230 and the interest rate is 1.33%,what is the total compound interest income at the end of 2 years?

Accepted Answer

A) $45.67 
B) $22.54 
C) $6.16 
D) $5.78 
E) None of the above. 
A) $45.67 
B) $22.54 
C) $6.16 
D) $5.78 
E) None of the above.

Question 16

What is the present value of $25,250,300 to be received 73 years from now if the interest rate is 22.5 percent?

Accepted Answer

A) $10,454,550.25 
B) $9.30 
C) $12,566.60 
D) $8,987,000.45 
E) $8,500,000.25 
A) $10,454,550.25 
B) $9.30 
C) $12,566.60 
D) $8,987,000.45 
E) $8,500,000.25

Question 17

You are given the choice between receiving $100,000 today or $100,000 in one year.Which of the following statements is accurate?

Accepted Answer

A) You would prefer to receive $100,000 today,as you could invest the money and in one year have much more than the original $100,000. 
B) You would prefer to receive $100,000 today,as the present value of receiving $100,000 in one year is much less than $100,000. 
C) You would prefer to receive $100,000 today due to the time value of money. 
D) All of the above statements are accurate. 
E) None of the above statements are accurate. 
A) You would prefer to receive $100,000 today,as you could invest the money and in one year have much more than the original $100,000. 
B) You would prefer to receive $100,000 today,as the present value of receiving $100,000 in one year is much less than $100,000. 
C) You would prefer to receive $100,000 today due to the time value of money. 
D) All of the above statements are accurate. 
E) None of the above statements are accurate.

Question 18

If the value of the principal today is $25,250 and the interest rate is 2.25%,what is the total compounding contribution at the end of one year?

Accepted Answer

A) $225.25 
B) $120.56 
C) $2.13 
D) $43.54 
E) $0 
A) $225.25 
B) $120.56 
C) $2.13 
D) $43.54 
E) $0

Question 19

The discount rate is:

Accepted Answer

A) The rate at which we bring future values back to the present. 
B) Obtained by taking the rate of return offered in the market for a comparable investment. 
C) Sometimes called the present value interest factor. 
D) Inversely related to the present value. 
E) All of the above. 
A) The rate at which we bring future values back to the present. 
B) Obtained by taking the rate of return offered in the market for a comparable investment. 
C) Sometimes called the present value interest factor. 
D) Inversely related to the present value. 
E) All of the above.

Question 20

If the interest rate is 10%,what is the present value of a stream of annual future cash flows equal to $1,000,expected to be paid at the end of every year,forever?

Accepted Answer

A) $1,00,000.00 
B) $10,000,000 
C) $1,500,000 
D) $10,000 
E) None of the above. 
A) $1,00,000.00 
B) $10,000,000 
C) $1,500,000 
D) $10,000 
E) None of the above.

Exam 2: Time Value of Money

What is the future value of $200 invested today for the next 3 years if the interest rate is 1 percent?

You own savings of $400,000 that grows at a nominal rate of 6% annually.What are the real and nominal dollars you will have today and at the end of each of the next seven years if the inflation rate is 2.5%?

The formula for future value is:

Consider an annuity that pays $45,768 at the end of very year for the next 12 years.What is the value of the annuity at the end of the 12 year period if the discount rate is 2%?

The formula for present value is:

If the value of the principal today is $2000 and the interest rate is 12.33%,what is the total simple interest income at the end of three years?

Paul has promised to pay Lucy $25,500 in seven years if she gives him $10,000 today.What discount rate is Paul using?

What is the real return?

What is an annuity due?

What is the rule of 72?

The future value of a sum is a function of:

The time value of money is best defined as:

If the value of the principal today is $1,560,250 and the interest rate is 11.25%,what is the total compounding contribution at the end of ten years?

If the value of the principal today is $230 and the interest rate is 1.33%,what is the total compound interest income at the end of 2 years?

What is the present value of $25,250,300 to be received 73 years from now if the interest rate is 22.5 percent?

You are given the choice between receiving $100,000 today or $100,000 in one year.Which of the following statements is accurate?

If the value of the principal today is $25,250 and the interest rate is 2.25%,what is the total compounding contribution at the end of one year?

The discount rate is:

If the interest rate is 10%,what is the present value of a stream of annual future cash flows equal to $1,000,expected to be paid at the end of every year,forever?

Introduction to PFP

Beginning the Planning Process

Household Finance

Financial Statements Analysis

Cash Flow Planning

Debt

Non Financial Investments

Financial Investments

Risk Management

Other Insurance

Retirement Planning

Educational Planning

Tax Planning

Estate Planning

Stocks, Bonds and Mutual Funds

Background Topics

Capital Needs Analysis

Behavioral Financial Planning

Modern Investment Theory

Employee Benefits

Behavioral Finance-Applications

Comprehensive Financial Plan-Dan and Laura

Examining Financial Regulation and Ethics

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