Question 1

What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

Accepted Answer

A)  $11,262.88 
B)  $11,826.02 
C)  $12,417.32 
D)  $13,038.19 
E)  $13,690.10 
A)  $11,262.88 
B)  $11,826.02 
C)  $12,417.32 
D)  $13,038.19 
E)  $13,690.10

Question 2

You have a chance to buy an annuity that pays $550 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Accepted Answer

A)  $1,412.84 
B)  $1,487.20 
C)  $1,565.48 
D)  $1,643.75 
E)  $1,725.94 
A)  $1,412.84 
B)  $1,487.20 
C)  $1,565.48 
D)  $1,643.75 
E)  $1,725.94

Question 3

Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

Accepted Answer

A)  $205.83 
B)  $216.67 
C)  $228.07 
D)  $240.08 
E)  $252.08 
A)  $205.83 
B)  $216.67 
C)  $228.07 
D)  $240.08 
E)  $252.08

Question 4

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

Accepted Answer

A)  The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity. 
B)  A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. 
C)  A bank loan's nominal interest rate will always be equal to or less than its effective annual rate. 
D)  If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%. 
E)  Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit. 
A)  The present value of a 5-year, $250 annuity due will be lower than the PV of a similar ordinary annuity. 
B)  A 30-year, $150,000 amortized mortgage will have larger monthly payments than an otherwise similar 20-year mortgage. 
C)  A bank loan's nominal interest rate will always be equal to or less than its effective annual rate. 
D)  If an investment pays 10% interest, compounded annually, its effective annual rate will be less than 10%. 
E)  Banks A and B offer the same nominal annual rate of interest, but A pays interest quarterly and B pays semiannually. Deposits in Bank B will provide the higher future value if you leave your funds on deposit.

What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

You have a chance to buy an annuity that pays $550 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Bonds and Their Valuation

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles

Mergers and Acquisitions

Financial Management and Stock Equilibrium

Filters

Exam 5: Time Value of Money

What is the PV of an annuity due with 5 payments of $2,500 at an interest rate of 5.5%?

You have a chance to buy an annuity that pays $550 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?

Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?

Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Bonds and Their Valuation

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles

Mergers and Acquisitions

Financial Management and Stock Equilibrium

Filters