Question 1

A deposit of $4,000 at the beginning of each year will grow to $1,081,170 in 30 years if invested at12% compounded annually.

Accepted Answer

A) True 
 B)False

Question 2

A local brokerage firm is offering a zero coupon certificate of deposit for $10,000. At maturity, threeyears from now, the investor will receive $14,000. What is the rate of return on this investment?

Accepted Answer

A)  11 percent 
B)  12 percent 
C)  13 percent 
D)  14 percent 
A)  11 percent 
B)  12 percent 
C)  13 percent 
D)  14 percent

Question 3

Julian was given a gold coin originally purchased for $1 by his great grandfather 50 years ago.Today the coin worth $450. The rate of return realized on the sale of this coin is approximatelyequal to

Accepted Answer

A)  13%. 
B)  50%. 
C)  7.5%. 
D)  cannot be determined with given information 
A)  13%. 
B)  50%. 
C)  7.5%. 
D)  cannot be determined with given information

Question 4

A $40,000 five year car loan at 12% compounded monthly will require monthly payments of $890.

Accepted Answer

A) True 
 B)False

Question 5

The future value of an ordinary annuity of $2,000 each year for 10 years, deposited at 12 percent, is ________.

Accepted Answer

A)  $39,310 
B)  $35,098 
C)  $20,000 
D)  $11,300 
A)  $39,310 
B)  $35,098 
C)  $20,000 
D)  $11,300

Question 6

$1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and$3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, theircombined future value at the end of year 3 is ________ .

Accepted Answer

A)  $ 6,700 
B)  $ 8,141 
C)  $17,000 
D)  $12,510 
A)  $ 6,700 
B)  $ 8,141 
C)  $17,000 
D)  $12,510

Question 7

Money invested at 6% compounded quarterly takes 11.64 years to double in value.

Accepted Answer

A) True 
 B)False

Question 8

The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.

Accepted Answer

A) True 
 B)False

Question 9

You recently graduated and borrowed $10,000 from you parents. Your parents want you to be responsible and have asked that you repay them $100 per month payable at the end of each month. They also require a 6% compounded monthly interest charge. How many years before you will have this loan paid off?

Accepted Answer

A)  16.32 years 
B)  7.88 years 
C)  11.58 years 
D)  21.88 years 
A)  16.32 years 
B)  7.88 years 
C)  11.58 years 
D)  21.88 years

Question 10

The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each ofthe next 10 years is  ________.

Accepted Answer

A)  $13,420 
B)  $31,291 
C)  $28,974 
D)  $14,494 
A)  $13,420 
B)  $31,291 
C)  $28,974 
D)  $14,494

Question 11

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is _________.

Accepted Answer

A)  $1,750 
B)  $288 
C)  $1,558 
D)  $1,896 
A)  $1,750 
B)  $288 
C)  $1,558 
D)  $1,896

Question 12

What is the highest effective rate attainable with a 12 percent nominal rate?

Accepted Answer

A)  12.00% 
B)  12.55% 
C)  12.95% 
D)  12.75% 
A)  12.00% 
B)  12.55% 
C)  12.95% 
D)  12.75%

Question 13

The amount of money that would have to be invested today at a given interest rate over a specified period in order to equal a future amount is called

Accepted Answer

A)  future value. 
B)  present value interest factor. 
C)  present value. 
D)  future value interest factor. 
A)  future value. 
B)  present value interest factor. 
C)  present value. 
D)  future value interest factor.

Question 14

You are planning for you newly arrived daughters education in 18 years when she heads off to university. You have a $1,000 and would like to have $10,000 when she enters school. What interest rate must be earned on your investment for this to be possible?

Accepted Answer

A)  7.22% 
B)  19.65% 
C)  13.65% 
D)  11.12% 
A)  7.22% 
B)  19.65% 
C)  13.65% 
D)  11.12%

Question 15

Currently you are 25 years old and planning for retirement in 30 years. You plan to buy into a mutual fund at $100 per month and expect to obtain a return of 1.25% per month. How much will the mutual fund be worth in 30 years?

Accepted Answer

A)  $692.328 
B)  $561,453 
C)  $893,001 
D)  $1,041,009 
A)  $692.328 
B)  $561,453 
C)  $893,001 
D)  $1,041,009

Question 16

A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three yearsfrom now, the investor will receive $32,000. What is the rate of return on this investment?

Accepted Answer

A)  6 percent 
B)  9 percent 
C)  12 percent 
D)  3 percent 
A)  6 percent 
B)  9 percent 
C)  12 percent 
D)  3 percent

Question 17

In comparing an ordinary annuity and an annuity due, which of the following is true?

Accepted Answer

A)  The future value of an annuity due is always less than the future value of an otherwise identical ordinary annuity, since one less payment is received with an annuity due. 
B)  All things being equal, one would prefer to receive an ordinary annuity compared to an annuity due. 
C)  The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. 
D)  The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due. 
A)  The future value of an annuity due is always less than the future value of an otherwise identical ordinary annuity, since one less payment is received with an annuity due. 
B)  All things being equal, one would prefer to receive an ordinary annuity compared to an annuity due. 
C)  The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. 
D)  The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due.

Question 18

A generous philanthropist plans to make a onetime endowment to a renowned heart researchcenter which would provide the facility with $250,000 per year into perpetuity. The rate of interestis expected to be 8 percent for all future time periods. How large must the endowment be?

Accepted Answer

A)  $2,314,814 
B)  $3,125,000 
C)  $2,000,000 
D)  $3,000,000 
A)  $2,314,814 
B)  $3,125,000 
C)  $2,000,000 
D)  $3,000,000

Question 19

How much will an investment of $1,000 earning 12% compounded monthly be worth in 40 years?

Accepted Answer

A)  $118,647 
B)  $93,051 
C)  $11,764,772 
D)  none of the above are correct 
A)  $118,647 
B)  $93,051 
C)  $11,764,772 
D)  none of the above are correct

Question 20

You just made your $459 monthly car loan payment and have 22 payments remaining. If your loan rate is at 12% APR, the outstanding balance is $10,241.

Accepted Answer

A) True 
 B)False

A deposit of $4,000 at the beginning of each year will grow to $1,081,170 in 30 years if invested at12% compounded annually.

A local brokerage firm is offering a zero coupon certificate of deposit for $10,000. At maturity, threeyears from now, the investor will receive $14,000. What is the rate of return on this investment?

Julian was given a gold coin originally purchased for $1 by his great grandfather 50 years ago.Today the coin worth $450. The rate of return realized on the sale of this coin is approximatelyequal to

A $40,000 five year car loan at 12% compounded monthly will require monthly payments of $890.

The future value of an ordinary annuity of $2,000 each year for 10 years, deposited at 12 percent, is ________.

$1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and$3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, theircombined future value at the end of year 3 is ________ .

Money invested at 6% compounded quarterly takes 11.64 years to double in value.

The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.

You recently graduated and borrowed $10,000 from you parents. Your parents want you to be responsible and have asked that you repay them $100 per month payable at the end of each month. They also require a 6% compounded monthly interest charge. How many years before you will have this loan paid off?

The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each ofthe next 10 years is ________.

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is _________.

What is the highest effective rate attainable with a 12 percent nominal rate?

The amount of money that would have to be invested today at a given interest rate over a specified period in order to equal a future amount is called

You are planning for you newly arrived daughters education in 18 years when she heads off to university. You have a $1,000 and would like to have $10,000 when she enters school. What interest rate must be earned on your investment for this to be possible?

Currently you are 25 years old and planning for retirement in 30 years. You plan to buy into a mutual fund at $100 per month and expect to obtain a return of 1.25% per month. How much will the mutual fund be worth in 30 years?

A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three yearsfrom now, the investor will receive $32,000. What is the rate of return on this investment?

In comparing an ordinary annuity and an annuity due, which of the following is true?

A generous philanthropist plans to make a onetime endowment to a renowned heart researchcenter which would provide the facility with $250,000 per year into perpetuity. The rate of interestis expected to be 8 percent for all future time periods. How large must the endowment be?

How much will an investment of $1,000 earning 12% compounded monthly be worth in 40 years?

You just made your $459 monthly car loan payment and have 22 payments remaining. If your loan rate is at 12% APR, the outstanding balance is $10,241.

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

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Exam 6: Time Value of Money

A deposit of $4,000 at the beginning of each year will grow to $1,081,170 in 30 years if invested at12% compounded annually.

A local brokerage firm is offering a zero coupon certificate of deposit for $10,000. At maturity, threeyears from now, the investor will receive $14,000. What is the rate of return on this investment?

Julian was given a gold coin originally purchased for $1 by his great grandfather 50 years ago.Today the coin worth $450. The rate of return realized on the sale of this coin is approximatelyequal to

A $40,000 five year car loan at 12% compounded monthly will require monthly payments of $890.

The future value of an ordinary annuity of $2,000 each year for 10 years, deposited at 12 percent, is ________.

$1,200 is received at the beginning of year 1, $2,200 is received at the beginning of year 2, and$3,300 is received at the beginning of year 3. If these cash flows are deposited at 12 percent, theircombined future value at the end of year 3 is ________ .

Money invested at 6% compounded quarterly takes 11.64 years to double in value.

The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.

The future value of a $2,000 annuity due deposited at 8 percent compounded annually for each ofthe next 10 years is ________.

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is _________.

What is the highest effective rate attainable with a 12 percent nominal rate?

The amount of money that would have to be invested today at a given interest rate over a specified period in order to equal a future amount is called

You are planning for you newly arrived daughters education in 18 years when she heads off to university. You have a $1,000 and would like to have $10,000 when she enters school. What interest rate must be earned on your investment for this to be possible?

Currently you are 25 years old and planning for retirement in 30 years. You plan to buy into a mutual fund at $100 per month and expect to obtain a return of 1.25% per month. How much will the mutual fund be worth in 30 years?

A local bank is offering a zero coupon certificate of deposit for $25,000. At maturity, three yearsfrom now, the investor will receive $32,000. What is the rate of return on this investment?

In comparing an ordinary annuity and an annuity due, which of the following is true?

A generous philanthropist plans to make a onetime endowment to a renowned heart researchcenter which would provide the facility with $250,000 per year into perpetuity. The rate of interestis expected to be 8 percent for all future time periods. How large must the endowment be?

How much will an investment of $1,000 earning 12% compounded monthly be worth in 40 years?

You just made your $459 monthly car loan payment and have 22 payments remaining. If your loan rate is at 12% APR, the outstanding balance is $10,241.

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Leverage and Capital Structure

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters