Question 1

The formula to compute the present value of a dollar is
 $$P V = F V \times \frac { 1 } { ( 1 + i ) ^ { n } }$$

Accepted Answer

A) True 
 B)False

Question 2

Table factors for present values

Accepted Answer

A)  decrease as the interest rate decreases 
B)  decrease as the number of periods increases 
C)  increase as the interest rate increases 
D)  increase as the number of periods increases 
A)  decrease as the interest rate decreases 
B)  decrease as the number of periods increases 
C)  increase as the interest rate increases 
D)  increase as the number of periods increases

Question 3

Currently in August, 2017), Abby wants to have $20,000 available in August 2021 to make a college tuition payment. To be able to have this amount available, Abby will make equal annual deposits in an investment account earning 12% annually in August 2017,2018,2019,2020,and 2021. What is the annual amount to be deposited?

Accepted Answer

A)  $5,548 
B)  $4,000 
C)  $3,148 
D)  $2,270 
A)  $5,548 
B)  $4,000 
C)  $3,148 
D)  $2,270

Question 4

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

Accepted Answer

A)  n + 1 and then subtract 1. 
B)  n + 1 and then add 1. 
C)  n - 1 and then add 1. 
D)  n - 1 and then subtract 1. 
A)  n + 1 and then subtract 1. 
B)  n + 1 and then add 1. 
C)  n - 1 and then add 1. 
D)  n - 1 and then subtract 1.

Question 5

One type of compensation provided by the time value of money is compensation for risk.

Accepted Answer

A) True 
 B)False

Question 6

The future value of an annuity due is lower if the discount rate is higher.

Accepted Answer

A) True 
 B)False

Question 7

David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of $115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is most nearly equal to

Accepted Answer

A)  9%. 
B)  8%. 
C)  7%. 
D)  6%. 
A)  9%. 
B)  8%. 
C)  7%. 
D)  6%.

Question 8

Jessie's Dry Cleaner began making $2,000 equal, annual deposits in a fund starting on January 2, 2016. The fund earns 10% compounded annually, and the last deposit is made on January 2, 2020. How much will be in the fund on January 2, 2021, one year after the final deposit?

Accepted Answer

A)  $15,000 
B)  $13,431 
C)  $12,105 
D)  $10,641 
A)  $15,000 
B)  $13,431 
C)  $12,105 
D)  $10,641

Question 9

To compare the value of amounts received at different times in the future, dollar amounts

Accepted Answer

A)  may be restated to their present value through discounting or restated to their future value by compounding. 
B)  must be converted to a single sum. 
C)  must be restated to their future value by adding the compound interest to date. 
D)  must be restated to their present value by removing the interest from the amount to be received in the future. 
A)  may be restated to their present value through discounting or restated to their future value by compounding. 
B)  must be converted to a single sum. 
C)  must be restated to their future value by adding the compound interest to date. 
D)  must be restated to their present value by removing the interest from the amount to be received in the future.

Question 10

Using the compound interest tables, answer the following questions.
Required:
a. What amount of interest will be earned on an investment of $10,500 left on deposit by
Marcy for three years at 9% interest compounded annually?
b. Travis deposited $10,000 in a fund that earns 8% interest compounded annually. How many years will it take for the fund to grow to $21,589.25?

Accepted Answer

None

Question 11

Using the compound interest tables, answer each of the following questions.
Required:
a. Assuming that $100,000 to be paid at the end of ten years has a present value today of
$50,834.90, what interest rate compounded annually is used in the calculation of the present value?
b. What amount must be deposited today if $200,000 is to be accumulated six years from today, and interest at 12% is compounded semiannually?

Accepted Answer

None

Question 12

What is the formula for the present value of an ordinary annuity of 1?

Accepted Answer

A)  $ \frac{(1+i)^{n-1}}{i} $ 
B)  $ \frac{1}{(1+i)^{n}} $ 
C)  $ (1+i)^{n} $ 
D)  $ \frac{1-\left[1 /(1+i)^{n}\right]}{i} $ 
A)  $ \frac{(1+i)^{n-1}}{i} $ 
B)  $ \frac{1}{(1+i)^{n}} $ 
C)  $ (1+i)^{n} $ 
D)  $ \frac{1-\left[1 /(1+i)^{n}\right]}{i} $

Question 13

The future value of an annuity due is determined one period after the first cash flow in the series.

Accepted Answer

A) True 
 B)False

Question 14

Georgia deposits $4,000 every three months for five years. The first deposit is made on March 31, 2016, and the last deposit is made on December 31, 2020. The fund earns 16% and interest is compounded quarterly. How much money will Georgia have on December 31, 2020, immediately after her last deposit? Factors for future value of an annuity of $1 are

Accepted Answer

A)  $123,876 
B)  $119,112 
C)  $110,034 
D)  $107,508 
A)  $123,876 
B)  $119,112 
C)  $110,034 
D)  $107,508

Question 15

The formula to calculate a present value of a deferred annuity is:
PVdeferred = C × Converted Factor for Present Value of Deferred Annuity of 1)

Accepted Answer

A) True 
 B)False

Question 16

All of the following are conditions for an ordinary annuity except

Accepted Answer

A)  periodic cash flows must be equal in amount 
B)  the time periods between the cash flows are the same length 
C)  the interest rate is constant for each time period 
D)  interest is compounded in the middle of each time period 
A)  periodic cash flows must be equal in amount 
B)  the time periods between the cash flows are the same length 
C)  the interest rate is constant for each time period 
D)  interest is compounded in the middle of each time period

Question 17

Marco needs $175,000 six years from today. How much should Marco deposit today into an investment account that provides a 12% annual return in order to accomplish his goals?

Accepted Answer

A)  $89,523 
B)  $88,660 
C)  $85,487 
D)  $62,500 
A)  $89,523 
B)  $88,660 
C)  $85,487 
D)  $62,500

Question 18

The present value of an annuity due is determined on the date of the last cash flow in the series.

Accepted Answer

A) True 
 B)False

Question 19

Bruno deposited $7,500 into an investment account and seven years later, the balance in the account was $10,910. What is the rate of return on this investment if interest is compounded annually?

Accepted Answer

A)  45.5% 
B)  6.5% 
C)  6.0% 
D)  5.5% 
A)  45.5% 
B)  6.5% 
C)  6.0% 
D)  5.5%

Question 20

Rita deposited $8,000 in a savings account that provides for interest at the rate of 16% compounded quarterly.
Required:
Compute the balance in the account at the end of seven years.

Accepted Answer

FV = $ 8,000fn = 28,

The formula to compute the present value of a dollar is $P V = F V \times \frac { 1 } { ( 1 + i ) ^ { n } }$

Table factors for present values

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

One type of compensation provided by the time value of money is compensation for risk.

The future value of an annuity due is lower if the discount rate is higher.

David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of $115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is most nearly equal to

Jessie's Dry Cleaner began making $2,000 equal, annual deposits in a fund starting on January 2, 2016. The fund earns 10% compounded annually, and the last deposit is made on January 2, 2020. How much will be in the fund on January 2, 2021, one year after the final deposit?

To compare the value of amounts received at different times in the future, dollar amounts

What is the formula for the present value of an ordinary annuity of 1?

The future value of an annuity due is determined one period after the first cash flow in the series.

The formula to calculate a present value of a deferred annuity is: PVdeferred = C × Converted Factor for Present Value of Deferred Annuity of 1)

All of the following are conditions for an ordinary annuity except

Marco needs $175,000 six years from today. How much should Marco deposit today into an investment account that provides a 12% annual return in order to accomplish his goals?

The present value of an annuity due is determined on the date of the last cash flow in the series.

Bruno deposited $7,500 into an investment account and seven years later, the balance in the account was $10,910. What is the rate of return on this investment if interest is compounded annually?

Rita deposited $8,000 in a savings account that provides for interest at the rate of 16% compounded quarterly. Required: Compute the balance in the account at the end of seven years.

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Filters

Exam 23: Understanding Time Value of Money Formulas and Concepts

The formula to compute the present value of a dollar is PV=FV×1(1+i)nP V = F V \times \frac { 1 } { ( 1 + i ) ^ { n } }PV=FV×(1+i)n1​

Table factors for present values

Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the future amount of an ordinary annuity of

One type of compensation provided by the time value of money is compensation for risk.

The future value of an annuity due is lower if the discount rate is higher.

David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of $115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is most nearly equal to

Jessie's Dry Cleaner began making $2,000 equal, annual deposits in a fund starting on January 2, 2016. The fund earns 10% compounded annually, and the last deposit is made on January 2, 2020. How much will be in the fund on January 2, 2021, one year after the final deposit?

To compare the value of amounts received at different times in the future, dollar amounts

What is the formula for the present value of an ordinary annuity of 1?

The future value of an annuity due is determined one period after the first cash flow in the series.

The formula to calculate a present value of a deferred annuity is: PVdeferred = C × Converted Factor for Present Value of Deferred Annuity of 1)

All of the following are conditions for an ordinary annuity except

Marco needs $175,000 six years from today. How much should Marco deposit today into an investment account that provides a 12% annual return in order to accomplish his goals?

The present value of an annuity due is determined on the date of the last cash flow in the series.

Bruno deposited $7,500 into an investment account and seven years later, the balance in the account was $10,910. What is the rate of return on this investment if interest is compounded annually?

Rita deposited $8,000 in a savings account that provides for interest at the rate of 16% compounded quarterly. Required: Compute the balance in the account at the end of seven years.

The Demand for and Supply of Financial Accounting Information

Financial Reporting: Its Conceptual Framework

Review of a Company S Accounting System

The Balance Sheet and the Statement of Shareholders Equity

The Income Statement and the Statement of Cash Flows Time Value of Money Module

Cash and Receivables

Inventories: Cost Measurement and Flow Assumptions

Inventories: Special Valuation Issues

Current Liabilities and Contingent Obligations

Property, Plant, and Equipment: Acquisition and Subsequent Investments

Depreciation, Depletion, Impairment, and Disposal

Intangibles

Investments and Long-Term Receivables

Financing Liabilities: Bonds and Long-Term Notes Payable

Contributed Capital

Retained Earnings and Earnings Per Share

Advanced Issues in Revenue Recognition

Accounting for Income Taxes

Accounting for Post-Retirement Benefits

Accounting for Leases

The Statement of Cash Flows

Accounting for Changes and Errors

Filters

The formula to compute the present value of a dollar is $P V = F V \times \frac { 1 } { ( 1 + i ) ^ { n } }$