Question 1

How do you calculate the future value of a single period?

Accepted Answer

A)  Add the interest earned to today's cash flow. 
B)  Add the interest earned to next year's cash flow. 
C)  Multiply the interest eared with today's cash flow. 
D)  Multiply the interest eared with next year's cash flow. 
A)  Add the interest earned to today's cash flow. 
B)  Add the interest earned to next year's cash flow. 
C)  Multiply the interest eared with today's cash flow. 
D)  Multiply the interest eared with next year's cash flow.

Question 2

Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Accepted Answer

A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64 
A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64

Question 3

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

Accepted Answer

A)  $4,362.97 
B)  $4,491.27 
C)  $5,374.11 
D)  $5,572.19 
A)  $4,362.97 
B)  $4,491.27 
C)  $5,374.11 
D)  $5,572.19

Question 4

You deposit $20,000 in an account that doubles in seven years. How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

Accepted Answer

A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years 
A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years

Question 5

A firm's net income last year was $2.65 million. Its net income grew 8 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?

Accepted Answer

A)  6.6 years 
B)  7.1 years 
C)  8.2 years 
D)  9 years 
A)  6.6 years 
B)  7.1 years 
C)  8.2 years 
D)  9 years

Question 6

You have $100,000 in your account. Assuming no additional deposits are made and your account earns 15 percent per year, how long will it take for the account to have a balance of $500,000?

Accepted Answer

A)  10.28 years 
B)  11.09 years 
C)  11.52 years 
D)  12.64 years 
A)  10.28 years 
B)  11.09 years 
C)  11.52 years 
D)  12.64 years

Question 7

How long will it take $100 to reach $500 when it grows at 10 percent per year?

Accepted Answer

A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years 
A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years

Question 8

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

Accepted Answer

A)  $646.96 
B)  $647.88 
C)  $712.50 
D)  $868.22 
A)  $646.96 
B)  $647.88 
C)  $712.50 
D)  $868.22

Question 9

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year. What would be the second year future value?

Accepted Answer

A)  $771.07 
B)  $819.00 
C)  $823.90 
D)  $1519.00 
A)  $771.07 
B)  $819.00 
C)  $823.90 
D)  $1519.00

Question 10

Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

Accepted Answer

A)  0.89 percent 
B)  1.13 percent 
C)  5.56 percent 
D)  13.0 percent 
A)  0.89 percent 
B)  1.13 percent 
C)  5.56 percent 
D)  13.0 percent

Question 11

How are present values affected by changes in interest rates?

Accepted Answer

A)  The lower the interest rate, the larger the present value will be. 
B)  The higher the interest rate, the larger the present value will be. 
C)  Present values are not affected by changes in interest rates. 
D)  One would need to know the future value in order to determine the impact. 
A)  The lower the interest rate, the larger the present value will be. 
B)  The higher the interest rate, the larger the present value will be. 
C)  Present values are not affected by changes in interest rates. 
D)  One would need to know the future value in order to determine the impact.

Question 12

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

Accepted Answer

A)  $478.11 
B)  $980.00 
C)  $1,024.87 
D)  $1,364.10 
A)  $478.11 
B)  $980.00 
C)  $1,024.87 
D)  $1,364.10

Question 13

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

Accepted Answer

A)  +25 percent, −20 percent, respectively 
B)  −25 percent, +20 percent, respectively 
C)  125 percent, −25 percent, respectively 
D)  125 percent, −20 percent, respectively 
A)  +25 percent, −20 percent, respectively 
B)  −25 percent, +20 percent, respectively 
C)  125 percent, −25 percent, respectively 
D)  125 percent, −20 percent, respectively

Question 14

You invested $5,000 in the stock market one year ago. Today, the investment is valued at $4,500. What return did you earn? What return would you need to get next year to break even overall?

Accepted Answer

A)  −111.11 percent, +90 percent, respectively 
B)  −90 percent, +111.11 percent, respectively 
C)  −10 percent, +11.11 percent, respectively 
D)  −11.11 percent, +10 percent, respectively 
A)  −111.11 percent, +90 percent, respectively 
B)  −90 percent, +111.11 percent, respectively 
C)  −10 percent, +11.11 percent, respectively 
D)  −11.11 percent, +10 percent, respectively

Question 15

A $400 investment has doubled to $800 in six years because of a 12.25 percent return. How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

Accepted Answer

A)  2.56 years 
B)  2.76 years 
C)  3.46 years 
D)  5 years 
A)  2.56 years 
B)  2.76 years 
C)  3.46 years 
D)  5 years

Question 16

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

Accepted Answer

A)  −112.5 percent, +75 percent, respectively 
B)  −75 percent, +112.5 percent, respectively 
C)  −33.33 percent, +25 percent, respectively 
D)  −25 percent, +33.33 percent, respectively 
A)  −112.5 percent, +75 percent, respectively 
B)  −75 percent, +112.5 percent, respectively 
C)  −33.33 percent, +25 percent, respectively 
D)  −25 percent, +33.33 percent, respectively

Question 17

You borrow $3,500 and will pay back the entire amount in five years. You are charged 9 percent interest per year. How much interest do you pay on this loan?

Accepted Answer

A)  $1,885.18 
B)  $1,907.35 
C)  $1,959.02 
D)  $2,106.81 
A)  $1,885.18 
B)  $1,907.35 
C)  $1,959.02 
D)  $2,106.81

Question 18

Ten years ago, Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8 percent rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Accepted Answer

A)  $1,589.03 
B)  $2,846.56 
C)  $3,109.48 
D)  $2,109.73 
A)  $1,589.03 
B)  $2,846.56 
C)  $3,109.48 
D)  $2,109.73

Question 19

Which of the following statements is correct?

Accepted Answer

A)  $100 to be received in the future is worth more than that today since it could be invested and earn interest. 
B)  $100 to be received in the future is worth less than that today since it could be invested and earn interest. 
C)  The Rule of 72 calculates the compounded return on investments. 
D)  Discounting is finding the future value of an original investment. 
A)  $100 to be received in the future is worth more than that today since it could be invested and earn interest. 
B)  $100 to be received in the future is worth less than that today since it could be invested and earn interest. 
C)  The Rule of 72 calculates the compounded return on investments. 
D)  Discounting is finding the future value of an original investment.

Question 20

How many years (and months) will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

Accepted Answer

A)  15 years and 2.29 months 
B)  17 years and 5.6 months 
C)  18 years and 3.8 months 
D)  19 years and 2.4 months 
A)  15 years and 2.29 months 
B)  17 years and 5.6 months 
C)  18 years and 3.8 months 
D)  19 years and 2.4 months

How do you calculate the future value of a single period?

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

You deposit $20,000 in an account that doubles in seven years. How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

A firm's net income last year was $2.65 million. Its net income grew 8 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?

You have $100,000 in your account. Assuming no additional deposits are made and your account earns 15 percent per year, how long will it take for the account to have a balance of $500,000?

How long will it take $100 to reach $500 when it grows at 10 percent per year?

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year. What would be the second year future value?

Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

How are present values affected by changes in interest rates?

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

You invested $5,000 in the stock market one year ago. Today, the investment is valued at $4,500. What return did you earn? What return would you need to get next year to break even overall?

A $400 investment has doubled to $800 in six years because of a 12.25 percent return. How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

You borrow $3,500 and will pay back the entire amount in five years. You are charged 9 percent interest per year. How much interest do you pay on this loan?

Ten years ago, Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8 percent rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Which of the following statements is correct?

How many years (and months) will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

How do you calculate the future value of a single period?

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

You deposit $20,000 in an account that doubles in seven years. How many years will it take the account to be reduced to its original value if it loses 12 percent per year?

A firm's net income last year was $2.65 million. Its net income grew 8 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?

You have $100,000 in your account. Assuming no additional deposits are made and your account earns 15 percent per year, how long will it take for the account to have a balance of $500,000?

How long will it take $100 to reach $500 when it grows at 10 percent per year?

What is the present value of a $750 payment made in three years when the discount rate is 5 percent?

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year. What would be the second year future value?

Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

How are present values affected by changes in interest rates?

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

You invested $5,000 in the stock market one year ago. Today, the investment is valued at $4,500. What return did you earn? What return would you need to get next year to break even overall?

A $400 investment has doubled to $800 in six years because of a 12.25 percent return. How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

You borrow $3,500 and will pay back the entire amount in five years. You are charged 9 percent interest per year. How much interest do you pay on this loan?

Ten years ago, Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8 percent rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Which of the following statements is correct?

How many years (and months) will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters