Question 1

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  True

Question 2

If you are able to earn a 15% rate of return what amount would you need to invest to have $15000 one year from now?

Accepted Answer

A)  $14852 
B)  $13125 
C)  $12750 
D)  $13044 
A)  $14852 
B)  $13125 
C)  $12750 
D)  $13044 D

Question 3

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. B

Question 4

If you are able to earn an 8% rate of return what amount would you need to invest to have $30000 one year from now?

Accepted Answer

A)  $27747 
B)  $27778 
C)  $27273 
D)  $29700 
A)  $27747 
B)  $27778 
C)  $27273 
D)  $29700

Question 5

Amy Brown plans to buy a surround sound stereo system for $1100 after 3 years. If the interest rate is 6% how much money should Amy set aside today for the purchase?

Accepted Answer

Use Table

Question 6

Compute the future value of $6000 invested every year at an interest rate of 9%. You invest the money for 20 years with the first payment made at the end of the year.

Accepted Answer

Use Table

Question 7

Frostmore Company is considering investing in an annuity contract that will return $50000 annually at the end of each year for 20 years. What amount should Frostmore pay for this investment if it earns an 8% return?

Accepted Answer

Use Table 4
$50000 ×

Question 8

If the single amount of $3000 is to be received in 3 years and discounted at 6% its present value is

Accepted Answer

A)  $2519. 
B)  $2830. 
C)  $2600. 
D)  $2820. 
A)  $2519. 
B)  $2830. 
C)  $2600. 
D)  $2820.

Question 9

A $10000 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 10

DMV leases a building for 20 years. The lease requires 20 annual payments of $12000 each with the first payment due immediately. The interest rate in the lease is 10%. What is the present value of the cost of leasing the building?

Accepted Answer

Use Table 4.
$12000

Question 11

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Accepted Answer

A) True 
 B)False

Question 12

If Sloane Joyner invests $10514.81 now and she will receive $30000 at the end of 11 years what annual rate of interest will she be earning on her investment?

Accepted Answer

A)  8% 
B)  8.5% 
C)  9% 
D)  10% 
A)  8% 
B)  8.5% 
C)  9% 
D)  10%

Question 13

If the present value of the cash ______________ exceeds the present value of the cash ________________ the investment should be rejected.

Accepted Answer

The answer of If the present value of the cash...

Question 14

Match the items below by entering the appropriate code letter in the space provided. 11eb1392_1c37_96ec_8021_99bf91b8df8f

Accepted Answer

The answer of Match the items below by entering the...

Question 15

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 16

McGoff Company deposits $20000 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)  $20000 by the future value of 1 factor. 
B)  $100000 by 1.04. 
C)  $100000 by 1.20. 
D)  $20000 by the future value of an annuity factor. 
A)  $20000 by the future value of 1 factor. 
B)  $100000 by 1.04. 
C)  $100000 by 1.20. 
D)  $20000 by the future value of an annuity factor.

Question 17

All of the following are necessary to compute the future value of a single amount except the

Accepted Answer

A)  interest rate. 
B)  number of periods. 
C)  principal. 
D)  maturity value. 
A)  interest rate. 
B)  number of periods. 
C)  principal. 
D)  maturity value.

Question 18

Martin Company issued $900000 10-year bonds and agreed to make annual sinking fund deposits of $72000. The deposits are made at the end of each year to a fund paying 5% interest compounded annually. What amount will be in the sinking fund at the end of the 10 years?

Accepted Answer

Use Table 2.
$72000

Question 19

Luis Rodriguez wants to buy a car in 3 years. He will need $3000 for a down payment. The annual interest rate is 9%. How much money must Luis invest today for the purchase?

Accepted Answer

Use Table

Question 20

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table. From what table is this factor taken?

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

Exam 27: Time Value of Money

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

If you are able to earn a 15% rate of return what amount would you need to invest to have $15000 one year from now?

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

If you are able to earn an 8% rate of return what amount would you need to invest to have $30000 one year from now?

Amy Brown plans to buy a surround sound stereo system for $1100 after 3 years. If the interest rate is 6% how much money should Amy set aside today for the purchase?

Compute the future value of $6000 invested every year at an interest rate of 9%. You invest the money for 20 years with the first payment made at the end of the year.

Frostmore Company is considering investing in an annuity contract that will return $50000 annually at the end of each year for 20 years. What amount should Frostmore pay for this investment if it earns an 8% return?

If the single amount of $3000 is to be received in 3 years and discounted at 6% its present value is

A $10000 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?

DMV leases a building for 20 years. The lease requires 20 annual payments of $12000 each with the first payment due immediately. The interest rate in the lease is 10%. What is the present value of the cost of leasing the building?

Compound interest is computed on the principal and any interest earned that has not been paid or received.

If Sloane Joyner invests $10514.81 now and she will receive $30000 at the end of 11 years what annual rate of interest will she be earning on her investment?

If the present value of the cash ______________ exceeds the present value of the cash ________________ the investment should be rejected.

Match the items below by entering the appropriate code letter in the space provided. 11eb1392_1c37_96ec_8021_99bf91b8df8f

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

McGoff Company deposits $20000 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

All of the following are necessary to compute the future value of a single amount except the

Martin Company issued $900000 10-year bonds and agreed to make annual sinking fund deposits of $72000. The deposits are made at the end of each year to a fund paying 5% interest compounded annually. What amount will be in the sinking fund at the end of the 10 years?

Luis Rodriguez wants to buy a car in 3 years. He will need $3000 for a down payment. The annual interest rate is 9%. How much money must Luis invest today for the purchase?

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table. From what table is this factor taken?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Filters

If the present value of the cash exceeds the present value of the cash __ the investment should be rejected.