Question 1

$10,000 to be received 25 years from now is worth $459 today using a discount rate of 15% per annum.

Accepted Answer

A) True 
 B)False

Question 2

If a Canada Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

Accepted Answer

A)  6 percent 
B)  5 percent 
C)  7 percent 
D)  8 percent 
A)  6 percent 
B)  5 percent 
C)  7 percent 
D)  8 percent

Question 3

In finance, a dollar today is worth more than a dollar tomorrow.

Accepted Answer

A) True 
 B)False

Question 4

The future value interest factor is

Accepted Answer

A)  always less than 0. 
B)  sometimes negative. 
C)  always greater than 1.0. 
D)  never greater than 25. 
A)  always less than 0. 
B)  sometimes negative. 
C)  always greater than 1.0. 
D)  never greater than 25.

Question 5

As the interest rate increases for any given period, the future value interest factor will

Accepted Answer

A)  remain unchanged. 
B)  decrease. 
C)  increase. 
D)  move toward 1. 
A)  remain unchanged. 
B)  decrease. 
C)  increase. 
D)  move toward 1.

Question 6

The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is ________ .

Accepted Answer

A)  $18,800 
B)  $12,093 
C)  $27,869 
D)  $ 1,020 
A)  $18,800 
B)  $12,093 
C)  $27,869 
D)  $ 1,020

Question 7

The future value increases with increases in the interest rate or the period of time funds are left on deposit.

Accepted Answer

A) True 
 B)False

Question 8

Your uncle recently sold a rare coin for $28,425; the coin was purchased 10 years ago for $16,800.Your uncle's annual rate of return on his coin investment is 7%.

Accepted Answer

A) True 
 B)False

Question 9

You are looking at purchasing a home and would like to obtain $100,000 mortgage amortized over25 years. The current interest rate on a 3-year term is 7% compounded semi-annually. What will your monthly payments be?

Accepted Answer

A)  $600 
B)  $900 
C)  $700 
D)  $1,000 
A)  $600 
B)  $900 
C)  $700 
D)  $1,000

Question 10

What is the rate of return on an investment of $16,278 if the company expects to receive $3,000 peryear for the next 10 years?

Accepted Answer

A)  3 percent 
B)  13 percent 
C)  18 percent 
D)  8 percent 
A)  3 percent 
B)  13 percent 
C)  18 percent 
D)  8 percent

Question 11

The nominal (stated) annual rate is the rate of interest actually paid or earned.

Accepted Answer

A) True 
 B)False

Question 12

Everything else being equal, the higher the discount rate, the higher the present value.

Accepted Answer

A) True 
 B)False

Question 13

The rate of return earned on an investment of $50,000 today that guarantees an annuity of $10,489for six years is approximately

Accepted Answer

A)  30%. 
B)  7%. 
C)  5%. 
D)  none of the above 
A)  30%. 
B)  7%. 
C)  5%. 
D)  none of the above

Question 14

You are looking to invest some money and are comparing bank rates. Bank A has a quoted rate of8.1% compounded semi-annually, while Bank B has a quoted rate of 8% compounded monthly. Which bank provides the better investment opportunity?

Accepted Answer

A)  Cannot be determined with the limited information provided 
B)  Bank B 
C)  They have the same equivalent rates 
D)  Bank A 
A)  Cannot be determined with the limited information provided 
B)  Bank B 
C)  They have the same equivalent rates 
D)  Bank A

Question 15

Indicate which of the following is true about annuities.

Accepted Answer

A)  An annuity due is a payment paid or received at the beginning of each period, that increases by an equal amount each period. 
B)  An ordinary annuity is an equal payment paid or received at the beginning of each period. 
C)  An ordinary annuity is an equal payment paid or received at the end of each period, that increases by an equal amount each period. 
D)  An annuity due is an equal payment paid or received at the beginning of each period. 
A)  An annuity due is a payment paid or received at the beginning of each period, that increases by an equal amount each period. 
B)  An ordinary annuity is an equal payment paid or received at the beginning of each period. 
C)  An ordinary annuity is an equal payment paid or received at the end of each period, that increases by an equal amount each period. 
D)  An annuity due is an equal payment paid or received at the beginning of each period.

Question 16

Since individuals are always confronted with opportunities to earn positive rates of return on theirfunds, the timing of cash flows does not have any significant economic consequences.

Accepted Answer

A) True 
 B)False

Question 17

Charlene owns stock in a company which has consistently paid a growing dividend over the last five years. The first year Charlene owned the stock, she received $1.71 per share and in the fifth year, she received $2.89 per share. What is the growth rate of the dividends over the last five years?

Accepted Answer

A)  12 percent 
B)  7 percent 
C)  5 percent 
D)  14 percent 
A)  12 percent 
B)  7 percent 
C)  5 percent 
D)  14 percent

Question 18

For any interest rate and for any period of time, the more frequently interest is compounded, the greater the amount of money that has to be invested today in order to accumulate a given future amount.

Accepted Answer

A) True 
 B)False

Question 19

The annual rate of return is variously referred to as

Accepted Answer

A)  the cost of capital. 
B)  the opportunity cost. 
C)  the discount rate. 
D)  all of the above. 
A)  the cost of capital. 
B)  the opportunity cost. 
C)  the discount rate. 
D)  all of the above.

Question 20

You have been offered a project paying $300 at the beginning of each year for the next 20 years.What is the maximum amount of money you would invest in this project if you expect 9 percentrate of return to your investment?

Accepted Answer

A)  $15,347.70 
B)  $ 2,738.70 
C)  $ 2,985.18 
D)  $ 6,000.00 
A)  $15,347.70 
B)  $ 2,738.70 
C)  $ 2,985.18 
D)  $ 6,000.00

$10,000 to be received 25 years from now is worth $459 today using a discount rate of 15% per annum.

If a Canada Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

In finance, a dollar today is worth more than a dollar tomorrow.

The future value interest factor is

As the interest rate increases for any given period, the future value interest factor will

The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is ________ .

The future value increases with increases in the interest rate or the period of time funds are left on deposit.

Your uncle recently sold a rare coin for $28,425; the coin was purchased 10 years ago for $16,800.Your uncle's annual rate of return on his coin investment is 7%.

You are looking at purchasing a home and would like to obtain $100,000 mortgage amortized over25 years. The current interest rate on a 3-year term is 7% compounded semi-annually. What will your monthly payments be?

What is the rate of return on an investment of $16,278 if the company expects to receive $3,000 peryear for the next 10 years?

The nominal (stated) annual rate is the rate of interest actually paid or earned.

Everything else being equal, the higher the discount rate, the higher the present value.

The rate of return earned on an investment of $50,000 today that guarantees an annuity of $10,489for six years is approximately

You are looking to invest some money and are comparing bank rates. Bank A has a quoted rate of8.1% compounded semi-annually, while Bank B has a quoted rate of 8% compounded monthly. Which bank provides the better investment opportunity?

Indicate which of the following is true about annuities.

Since individuals are always confronted with opportunities to earn positive rates of return on theirfunds, the timing of cash flows does not have any significant economic consequences.

Charlene owns stock in a company which has consistently paid a growing dividend over the last five years. The first year Charlene owned the stock, she received $1.71 per share and in the fifth year, she received $2.89 per share. What is the growth rate of the dividends over the last five years?

For any interest rate and for any period of time, the more frequently interest is compounded, the greater the amount of money that has to be invested today in order to accumulate a given future amount.

The annual rate of return is variously referred to as

You have been offered a project paying $300 at the beginning of each year for the next 20 years.What is the maximum amount of money you would invest in this project if you expect 9 percentrate of return to your investment?

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

$10,000 to be received 25 years from now is worth $459 today using a discount rate of 15% per annum.

If a Canada Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

In finance, a dollar today is worth more than a dollar tomorrow.

The future value interest factor is

As the interest rate increases for any given period, the future value interest factor will

The present value of an ordinary annuity of $2,350 each year for eight years, assuming an opportunity cost of 11 percent, is ________ .

The future value increases with increases in the interest rate or the period of time funds are left on deposit.

Your uncle recently sold a rare coin for $28,425; the coin was purchased 10 years ago for $16,800.Your uncle's annual rate of return on his coin investment is 7%.

You are looking at purchasing a home and would like to obtain $100,000 mortgage amortized over25 years. The current interest rate on a 3-year term is 7% compounded semi-annually. What will your monthly payments be?

What is the rate of return on an investment of $16,278 if the company expects to receive $3,000 peryear for the next 10 years?

The nominal (stated) annual rate is the rate of interest actually paid or earned.

Everything else being equal, the higher the discount rate, the higher the present value.

The rate of return earned on an investment of $50,000 today that guarantees an annuity of $10,489for six years is approximately

You are looking to invest some money and are comparing bank rates. Bank A has a quoted rate of8.1% compounded semi-annually, while Bank B has a quoted rate of 8% compounded monthly. Which bank provides the better investment opportunity?

Indicate which of the following is true about annuities.

Since individuals are always confronted with opportunities to earn positive rates of return on theirfunds, the timing of cash flows does not have any significant economic consequences.

Charlene owns stock in a company which has consistently paid a growing dividend over the last five years. The first year Charlene owned the stock, she received $1.71 per share and in the fifth year, she received $2.89 per share. What is the growth rate of the dividends over the last five years?

For any interest rate and for any period of time, the more frequently interest is compounded, the greater the amount of money that has to be invested today in order to accumulate a given future amount.

The annual rate of return is variously referred to as

You have been offered a project paying $300 at the beginning of each year for the next 20 years.What is the maximum amount of money you would invest in this project if you expect 9 percentrate of return to your investment?

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