Question 1

The Rule of 72 is a simple mathematical approximation for

Accepted Answer

A)  the present value required to double an investment. 
B)  the future value required to double an investment. 
C)  the payments required to double an investment. 
D)  the number of years required to double an investment. 
A)  the present value required to double an investment. 
B)  the future value required to double an investment. 
C)  the payments required to double an investment. 
D)  the number of years required to double an investment.

Question 2

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

Accepted Answer

A)  0.08 year 
B)  8 years 
C)  8.33 years 
D)  12 years 
A)  0.08 year 
B)  8 years 
C)  8.33 years 
D)  12 years

Question 3

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

Accepted Answer

A)  $5,290.42 
B)  $5,532.20 
C)  $5,802.82 
D)  $6,103.73 
A)  $5,290.42 
B)  $5,532.20 
C)  $5,802.82 
D)  $6,103.73

Question 4

How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

Accepted Answer

A)  7.00 years 
B)  7.55 years 
C)  9.52 years 
D)  10.29 years 
A)  7.00 years 
B)  7.55 years 
C)  9.52 years 
D)  10.29 years

Question 5

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

Accepted Answer

A)  $45.67 
B)  $64.17 
C)  $177.95 
D)  $220.00 
A)  $45.67 
B)  $64.17 
C)  $177.95 
D)  $220.00

Question 6

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

Accepted Answer

A)  At age 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 percent. 
C)  Both yield the same amount at age 60. 
D)  There is not enough information to determine which case earns the most money at age 60. 
A)  At age 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 percent. 
C)  Both yield the same amount at age 60. 
D)  There is not enough information to determine which case earns the most money at age 60.

Question 7

The interest rate, i, which we use to calculate present value, is often referred to as the

Accepted Answer

A)  discount rate. 
B)  multiplier. 
C)  compound rate. 
D)  dividend. 
A)  discount rate. 
B)  multiplier. 
C)  compound rate. 
D)  dividend.

Question 8

People borrow money because they expect

Accepted Answer

A)  their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan. 
B)  the time value of money to apply only if they are saving money. 
C)  interest rates to rise. 
D)  that consumers don't need to calculate the impact of interest on their purchases. 
A)  their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan. 
B)  the time value of money to apply only if they are saving money. 
C)  interest rates to rise. 
D)  that consumers don't need to calculate the impact of interest on their purchases.

Question 9

Which of the following statements about the Rule of 72 is not true?

Accepted Answer

A)  It is a mathematical approximation for the number of years required to double an investment. 
B)  It illustrates the power of a discounted rate. 
C)  It can be used to approximate the interest rate needed to double an investment for a specified amount of time. 
D)  None of the above. 
A)  It is a mathematical approximation for the number of years required to double an investment. 
B)  It illustrates the power of a discounted rate. 
C)  It can be used to approximate the interest rate needed to double an investment for a specified amount of time. 
D)  None of the above.

Question 10

A dollar paid (or received) in the future is

Accepted Answer

A)  worth more than a dollar paid (or received) today. 
B)  worth as much as a dollar paid (or received) today. 
C)  not worth as much as a dollar paid (or received) today. 
D)  not comparable to a dollar paid (or received) today. 
A)  worth more than a dollar paid (or received) today. 
B)  worth as much as a dollar paid (or received) today. 
C)  not worth as much as a dollar paid (or received) today. 
D)  not comparable to a dollar paid (or received) today.

Question 11

A firm's net income last year was $1.5 million. Its net income grew 5 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)  7.6 years 
B)  10.47 years 
C)  14.21 years 
D)  14.55 years 
A)  7.6 years 
B)  10.47 years 
C)  14.21 years 
D)  14.55 years

Question 12

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

Accepted Answer

A)  43.09 percent 
B)  55.78 percent 
C)  76.47 percent 
D)  81.03 percent 
A)  43.09 percent 
B)  55.78 percent 
C)  76.47 percent 
D)  81.03 percent

Question 13

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Accepted Answer

A)  8.45 percent 
B)  10.00 percent 
C)  10.67 percent 
D)  12.50 percent 
A)  8.45 percent 
B)  10.00 percent 
C)  10.67 percent 
D)  12.50 percent

Question 14

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1, 2 percent in year 2, 12 percent in year 3, and 9 percent in years 4 and 5.

Accepted Answer

A)  $2,679.15 
B)  $2,206.81 
C)  $2,317.03 
D)  $2,362.19 
A)  $2,679.15 
B)  $2,206.81 
C)  $2,317.03 
D)  $2,362.19

Question 15

Determine the interest rate earned on a $200 deposit when $208 is paid back in one year.

Accepted Answer

A)  104 percent 
B)  8 percent 
C)  4 percent 
D)  2 percent 
A)  104 percent 
B)  8 percent 
C)  4 percent 
D)  2 percent

Question 16

A $7 million deposit earns 5 percent for nine years. If the account loses 2 percent per year after that, how long will it take to be reduced back to $7 million?

Accepted Answer

A)  6.78 years 
B)  10.29 years 
C)  11.29 years 
D)  21.74 years 
A)  6.78 years 
B)  10.29 years 
C)  11.29 years 
D)  21.74 years

Question 17

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year?

Accepted Answer

A)  $35.00 
B)  $98.36 
C)  $535.00 
D)  $690.82 
A)  $35.00 
B)  $98.36 
C)  $535.00 
D)  $690.82

Question 18

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?

Accepted Answer

A)  $132.89 
B)  $147.23 
C)  $152.91 
D)  $167.50 
A)  $132.89 
B)  $147.23 
C)  $152.91 
D)  $167.50

Question 19

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

Accepted Answer

A)  4.97 years 
B)  7.42 years 
C)  10.72 years 
D)  17.67 years 
A)  4.97 years 
B)  7.42 years 
C)  10.72 years 
D)  17.67 years

Question 20

Which of the following investments would you prefer?

Accepted Answer

A)  an investment earning 10 percent for 20 years 
B)  an investment earning 8.5 percent for 20 years 
C)  an investment earning 5 percent for 40 years 
D)  an investment earning 3 percent for 40 years 
A)  an investment earning 10 percent for 20 years 
B)  an investment earning 8.5 percent for 20 years 
C)  an investment earning 5 percent for 40 years 
D)  an investment earning 3 percent for 40 years

The Rule of 72 is a simple mathematical approximation for

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

The interest rate, i, which we use to calculate present value, is often referred to as the

People borrow money because they expect

Which of the following statements about the Rule of 72 is not true?

A dollar paid (or received) in the future is

A firm's net income last year was $1.5 million. Its net income grew 5 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1, 2 percent in year 2, 12 percent in year 3, and 9 percent in years 4 and 5.

Determine the interest rate earned on a $200 deposit when $208 is paid back in one year.

A $7 million deposit earns 5 percent for nine years. If the account loses 2 percent per year after that, how long will it take to be reduced back to $7 million?

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year?

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

Which of the following investments would you prefer?

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

The Rule of 72 is a simple mathematical approximation for

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

What is the present value of a $7,000 payment made in six years when the discount rate is 4 percent?

How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

What is the value in year 3 of a $250 cash flow made in year 15 when interest rates are 12 percent?

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

The interest rate, i, which we use to calculate present value, is often referred to as the

People borrow money because they expect

Which of the following statements about the Rule of 72 is not true?

A dollar paid (or received) in the future is

A firm's net income last year was $1.5 million. Its net income grew 5 percent during the last "5" years. If that growth rate continues, how long will it take for the firm's net income to double?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

What annual rate of return is implied on a $1,000 loan taken next year when $1,500 must be repaid in year 5?

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1, 2 percent in year 2, 12 percent in year 3, and 9 percent in years 4 and 5.

Determine the interest rate earned on a $200 deposit when $208 is paid back in one year.

A $7 million deposit earns 5 percent for nine years. If the account loses 2 percent per year after that, how long will it take to be reduced back to $7 million?

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year?

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

Which of the following investments would you prefer?

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