Question 1

Compound interest is the return on principal

Accepted Answer

A) only. 
B) for one or more periods. 
C) plus interest for two or more periods. 
D) for one period. 
A) only. 
B) for one or more periods. 
C) plus interest for two or more periods. 
D) for one period.

Question 2

If the single amount of $3,000 is to be received in 3 years and discounted at 6%, its present value is

Accepted Answer

A) $2,519. 
B) $2,830. 
C) $2,600. 
D) $2,820. 
A) $2,519. 
B) $2,830. 
C) $2,600. 
D) $2,820.

Question 3

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

Accepted Answer

A) $8,500. 
B) $7,830. 
C) $8,638. 
D) $8,860. 
A) $8,500. 
B) $7,830. 
C) $8,638. 
D) $8,860.

Question 4

The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

Accepted Answer

A) True 
 B)False

Question 5

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

Accepted Answer

A) $27,747 
B) $27,778 
C) $27,273 
D) $29,700 
A) $27,747 
B) $27,778 
C) $27,273 
D) $29,700

Question 6

If $40,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

Accepted Answer

A) $32,878 
B) $48,000 
C) $48,620 
D) $48,666 
A) $32,878 
B) $48,000 
C) $48,620 
D) $48,666

Question 7

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now.The sponsor of the prize uses a 6% discount rate.If you elect to receive the present value of the prize now, the amount you will receive is

Accepted Answer

A) $2,518,860. 
B) $2,591,520. 
C) $2,670,000. 
D) $3,000,000. 
A) $2,518,860. 
B) $2,591,520. 
C) $2,670,000. 
D) $3,000,000.

Question 8

Peter Johnson invests $35,516.80 now for a series of $5,000 annual returns beginning one year from now.Peter will earn 10% on the initial investment.How many annual payments will Peter receive?

Accepted Answer

A) 10 
B) 12 
C) 13 
D) 15 
A) 10 
B) 12 
C) 13 
D) 15

Question 9

With a financial calculator, one can solve for any interest rate or for any number of periods in a time value of money problem.

Accepted Answer

A) True 
 B)False

Question 10

Dexter Company is considering purchasing equipment.The equipment will produce the following cash flows: $$\begin{array} { l l } 
\text { Year 1 } & \$ 120,000 \
\text { Year 2 } & \$ 200,000
\end{array}$$ Dexter requires a minimum rate of return of 10%.What is the maximum price Dexter should pay for this equipment?

Accepted Answer

A) $274,381 
B) $165,290 
C) $320,000 
D) $160,000 
A) $274,381 
B) $165,290 
C) $320,000 
D) $160,000

Question 11

If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its present value is

Accepted Answer

A) $1,818. 
B) $1,623. 
C) $1,802. 
D) $2,754. 
A) $1,818. 
B) $1,623. 
C) $1,802. 
D) $2,754.

Question 12

The future value of an annuity factor for 2 periods is equal to

Accepted Answer

A) 1 plus the interest rate. 
B) 2 plus the interest rate. 
C) 2 minus the interest rate. 
D) 2. 
A) 1 plus the interest rate. 
B) 2 plus the interest rate. 
C) 2 minus the interest rate. 
D) 2.

Question 13

If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

Accepted Answer

A) $48,867 
B) $315,000 
C) $377,337 
D) $450,000 
A) $48,867 
B) $315,000 
C) $377,337 
D) $450,000

Question 14

Which of the following discount rates will produce the smallest present value?

Accepted Answer

A) 8% 
B) 9% 
C) 10% 
D) 4% 
A) 8% 
B) 9% 
C) 10% 
D) 4%

Question 15

McGoff Company deposits $20,000 in a fund at the end of each year for 5 years.The fund pays interest of 4% compounded annually.The balance in the fund at the end of 5 years is computed by multiplying

Accepted Answer

A) $20,000 by the future value of 1 factor. 
B) $100,000 by 1.04. 
C) $100,000 by 1.20. 
D) $20,000 by the future value of an annuity factor. 
A) $20,000 by the future value of 1 factor. 
B) $100,000 by 1.04. 
C) $100,000 by 1.20. 
D) $20,000 by the future value of an annuity factor.

Question 16

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

Accepted Answer

A) $1,200. 
B) $4,484. 
C) $4,477. 
D) $4,200. 
A) $1,200. 
B) $4,484. 
C) $4,477. 
D) $4,200.

Question 17

In computing the present value of an annuity, it is not necessary to know the number of discount periods.

Accepted Answer

A) True 
 B)False

Question 18

Which table has a factor of 1.00000 for 1 period at every interest rate?

Accepted Answer

A) Future value of 1 
B) Future value of an annuity of 1 
C) Present value of 1 
D) Present value of an annuity of 1 
A) Future value of 1 
B) Future value of an annuity of 1 
C) Present value of 1 
D) Present value of an annuity of 1

Question 19

A $10,000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

Accepted Answer

A) 5 interest periods, 6% interest 
B) 20 interest periods, 6% interest 
C) 20 interest periods, 1.5% interest 
D) 5 interest periods, 1.5% interest 
A) 5 interest periods, 6% interest 
B) 20 interest periods, 6% interest 
C) 20 interest periods, 1.5% interest 
D) 5 interest periods, 1.5% interest

Question 20

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years.The appropriate discount rate is 15%.What is the present value of the payments?

Accepted Answer

A) $114,199 
B) $160,000 
C) $46,975 
D) $150,135 
A) $114,199 
B) $160,000 
C) $46,975 
D) $150,135

Compound interest is the return on principal

If the single amount of $3,000 is to be received in 3 years and discounted at 6%, its present value is

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

If $40,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

Peter Johnson invests $35,516.80 now for a series of $5,000 annual returns beginning one year from now.Peter will earn 10% on the initial investment.How many annual payments will Peter receive?

With a financial calculator, one can solve for any interest rate or for any number of periods in a time value of money problem.

Dexter Company is considering purchasing equipment.The equipment will produce the following cash flows: Year 1 \ 120,000 Year 2 \ 200,000 Dexter requires a minimum rate of return of 10%.What is the maximum price Dexter should pay for this equipment?

If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its present value is

The future value of an annuity factor for 2 periods is equal to

If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

Which of the following discount rates will produce the smallest present value?

McGoff Company deposits $20,000 in a fund at the end of each year for 5 years.The fund pays interest of 4% compounded annually.The balance in the fund at the end of 5 years is computed by multiplying

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

In computing the present value of an annuity, it is not necessary to know the number of discount periods.

Which table has a factor of 1.00000 for 1 period at every interest rate?

A $10,000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years.The appropriate discount rate is 15%.What is the present value of the payments?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters

Exam 15: Time Value of Money

Compound interest is the return on principal

If the single amount of $3,000 is to be received in 3 years and discounted at 6%, its present value is

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

If $40,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

Peter Johnson invests $35,516.80 now for a series of $5,000 annual returns beginning one year from now.Peter will earn 10% on the initial investment.How many annual payments will Peter receive?

With a financial calculator, one can solve for any interest rate or for any number of periods in a time value of money problem.

Dexter Company is considering purchasing equipment.The equipment will produce the following cash flows: Year 1 \ 120,000 Year 2 \ 200,000 Dexter requires a minimum rate of return of 10%.What is the maximum price Dexter should pay for this equipment?

If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its present value is

The future value of an annuity factor for 2 periods is equal to

If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

Which of the following discount rates will produce the smallest present value?

McGoff Company deposits $20,000 in a fund at the end of each year for 5 years.The fund pays interest of 4% compounded annually.The balance in the fund at the end of 5 years is computed by multiplying

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

In computing the present value of an annuity, it is not necessary to know the number of discount periods.

Which table has a factor of 1.00000 for 1 period at every interest rate?

A $10,000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years.The appropriate discount rate is 15%.What is the present value of the payments?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Filters