Question 1

During years 2 and 3 combined, the account earned $10 compound interest. How much was in simple interest?

Accepted Answer

A)  $30 
B)  $80 
C)  $105 
D)  $110 
E)  $120 
A)  $30 
B)  $80 
C)  $105 
D)  $110 
E)  $120

Question 2

Which one of the following interest rates will produce the largest value at the end of ten years given a lump sum investment of $5,000?

Accepted Answer

A)  5.5%, compounded annually 
B)  5.5%, simple interest 
C)  6.0%, simple interest 
D)  6.0%, compounded annually 
E)  6.0%, compounded semi-annually 
A)  5.5%, compounded annually 
B)  5.5%, simple interest 
C)  6.0%, simple interest 
D)  6.0%, compounded annually 
E)  6.0%, compounded semi-annually

Question 3

As the discount rate increases, the present value of $500 to be received six years from now:

Accepted Answer

A)  Remains constant. 
B)  Also increases. 
C)  Decreases. 
D)  Becomes negative. 
E)  Will vary but the direction of the change is unknown. 
A)  Remains constant. 
B)  Also increases. 
C)  Decreases. 
D)  Becomes negative. 
E)  Will vary but the direction of the change is unknown.

Question 4

What is the future value of $3,497 invested for 15 years at 7.5% compounded annually?

Accepted Answer

A)  $7,431.13 
B)  $10,347.19 
C)  $14,289.16 
D)  $14,911.08 
E)  $15,267.21 
A)  $7,431.13 
B)  $10,347.19 
C)  $14,289.16 
D)  $14,911.08 
E)  $15,267.21

Question 5

You collect model cars. One particular model increases in value at a rate of 5% per year. Today, the model is worth $29.50. How much additional money can you make if you wait ten years to sell the
Model rather than selling it ﬁve years from now?

Accepted Answer

A)  $9.98 
B)  $10.40 
C)  $10.86 
D)  $11.03 
E)  $11.24 
A)  $9.98 
B)  $10.40 
C)  $10.86 
D)  $11.03 
E)  $11.24

Question 6

The present value interest factor is calculated as:

Accepted Answer

A)  1/(1 + r - t) 
B)  1/(1 + rt) 
C)  1/(1 + r)(t) 
D)  1/(1 + r)t 
E)  1 + r + t 
A)  1/(1 + r - t) 
B)  1/(1 + rt) 
C)  1/(1 + r)(t) 
D)  1/(1 + r)t 
E)  1 + r + t

Question 7

Jeanette needs $15,000 as a down payment for a house six years from now. She earns 3.5% on her savings. Jeanette can either deposit one lump sum today for this purpose or she can wait a year
And deposit a lump sum. How much additional money must Jeanette deposit if she waits for one
Year rather than making the deposit today?

Accepted Answer

A)  $121.03 
B)  $166.67 
C)  $307.00 
D)  $333.33 
E)  $427.09 
A)  $121.03 
B)  $166.67 
C)  $307.00 
D)  $333.33 
E)  $427.09

Question 8

Interest earned on the reinvestment of previous interest payments is called _____________.

Accepted Answer

A)  Free interest. 
B)  Annual interest. 
C)  Simple interest. 
D)  Interest on interest. 
E)  Compound interest. 
A)  Free interest. 
B)  Annual interest. 
C)  Simple interest. 
D)  Interest on interest. 
E)  Compound interest.

Question 9

You would like to give your daughter $50,000 towards her college education 15 years from now. How much money must you set aside today for this purpose if you can earn 9% on your
Investments?

Accepted Answer

A)  $12,250.00 
B)  $12,989.47 
C)  $13,726.90 
D)  $14,008.50 
E)  $14,211.11 
A)  $12,250.00 
B)  $12,989.47 
C)  $13,726.90 
D)  $14,008.50 
E)  $14,211.11

Question 10

Six years ago, Home Health Industries (HHI) adopted a plan to expand its services next year. At the time the plan was adopted, HHI set aside $125,000 in excess funds to be held for this purpose. As
Of today, that money has increased in value to $186,408. What rate of interest is the ﬁrm earning on
These funds?

Accepted Answer

A)  6.89% 
B)  7.10% 
C)  7.18% 
D)  7.27% 
E)  7.43% 
A)  6.89% 
B)  7.10% 
C)  7.18% 
D)  7.27% 
E)  7.43%

Question 11

The future value of a single sum will increase more rapidly when the interest rate increases.

Accepted Answer

A) True 
 B)False

Question 12

Approximately 13,500 students enrolled at Kwantlen University ﬁve years ago. Today, enrolment reached 18,800 students. Determine the annual growth rate in student enrolment.

Accepted Answer

A)  5.55% 
B)  6.85% 
C)  7.65% 
D)  8.25% 
E)  9.55% 
A)  5.55% 
B)  6.85% 
C)  7.65% 
D)  8.25% 
E)  9.55%

Question 13

Suppose that r and t are greater than zero, which statement is correct?

Accepted Answer

A)  Present value interest factors are less than one. 
B)  Only Future value interest factors are less than one. 
C)  Only Present value interest factors are greater than future value interest factors. 
D)  Only Present value interest factors grow as t grows, provided r is held constant. 
E)  Present value interest factors are negative. 
A)  Present value interest factors are less than one. 
B)  Only Future value interest factors are less than one. 
C)  Only Present value interest factors are greater than future value interest factors. 
D)  Only Present value interest factors grow as t grows, provided r is held constant. 
E)  Present value interest factors are negative.

Question 14

Sun Lee has $500 today. Which one of the following statements is correct if she invests this money at a positive rate of interest for ﬁve years?

Accepted Answer

A)  The higher the interest rate she earns, the less money she will have in the future. 
B)  The higher the interest rate, the longer she has to wait for her money to grow to $1,000 in value. 
C)  If Sun Lee can earn 7%, she will have to wait about six years to have $1,000 total. 
D)  At the end of the ﬁve years Sun Lee will have less money if she invests at 5% rather than at 7%. 
E)  At 10% interest Sun Lee should expect to have $1,000 in her account at the end of the ﬁve years. 
A)  The higher the interest rate she earns, the less money she will have in the future. 
B)  The higher the interest rate, the longer she has to wait for her money to grow to $1,000 in value. 
C)  If Sun Lee can earn 7%, she will have to wait about six years to have $1,000 total. 
D)  At the end of the ﬁve years Sun Lee will have less money if she invests at 5% rather than at 7%. 
E)  At 10% interest Sun Lee should expect to have $1,000 in her account at the end of the ﬁve years.

Question 15

What is the future value of $4,160 invested for eight years at 8.5% compounded annually?

Accepted Answer

A)  $6,988.80 
B)  $7,989.71 
C)  $8,122.20 
D)  $8,211.29 
E)  $8,404.12 
A)  $6,988.80 
B)  $7,989.71 
C)  $8,122.20 
D)  $8,211.29 
E)  $8,404.12

Question 16

If the town's population was 62,000 at the end of year 5, and the population grew at the same annual rate as the number of eating establishments between the end of year 1 and the end of year
5, what was the town's population at the end of year 1 if the annual growth rate is 5.626%?

Accepted Answer

A)  49,809 
B)  51,435 
C)  53,230 
D)  54,330 
E)  56,730 
A)  49,809 
B)  51,435 
C)  53,230 
D)  54,330 
E)  56,730

Question 17

The future value interest factor is calculated as:

Accepted Answer

A)  (1 + r)t 
B)  (1 + rt) 
C)  (1 + r)(t) 
D)  1 + r - t 
E)  (1 + r)(2) 
A)  (1 + r)t 
B)  (1 + rt) 
C)  (1 + r)(t) 
D)  1 + r - t 
E)  (1 + r)(2)

Question 18

On a ﬁnancial calculator, the symbol "N" represents the:

Accepted Answer

A)  Current value. 
B)  Time periods. 
C)  Future value. 
D)  Rate of simple interest. 
E)  Rate of compound interest. 
A)  Current value. 
B)  Time periods. 
C)  Future value. 
D)  Rate of simple interest. 
E)  Rate of compound interest.

Question 19

Interest earned on the reinvestment of previous interest payments is called simple interest.

Accepted Answer

A) True 
 B)False

Question 20

The I.C. James Co. invested $10,000 six years ago at 5% simple interest. The I.M. Smart Co.
invested $10,000 six years ago at 5% interest which is compounded annually. Both the I.C. James
Co. and the I.M. Smart Co. will earn $500 interest in the ﬁrst year.

Accepted Answer

A) True 
 B)False

Exam 5: Introduction to Valuation: the Time Value of Money

During years 2 and 3 combined, the account earned $10 compound interest. How much was in simple interest?

Which one of the following interest rates will produce the largest value at the end of ten years given a lump sum investment of $5,000?

As the discount rate increases, the present value of $500 to be received six years from now:

What is the future value of $3,497 invested for 15 years at 7.5% compounded annually?

You collect model cars. One particular model increases in value at a rate of 5% per year. Today, the model is worth $29.50. How much additional money can you make if you wait ten years to sell the Model rather than selling it ﬁve years from now?

The present value interest factor is calculated as:

Interest earned on the reinvestment of previous interest payments is called _____________.

You would like to give your daughter $50,000 towards her college education 15 years from now. How much money must you set aside today for this purpose if you can earn 9% on your Investments?

The future value of a single sum will increase more rapidly when the interest rate increases.

Approximately 13,500 students enrolled at Kwantlen University ﬁve years ago. Today, enrolment reached 18,800 students. Determine the annual growth rate in student enrolment.

Suppose that r and t are greater than zero, which statement is correct?

Sun Lee has $500 today. Which one of the following statements is correct if she invests this money at a positive rate of interest for ﬁve years?

What is the future value of $4,160 invested for eight years at 8.5% compounded annually?

If the town's population was 62,000 at the end of year 5, and the population grew at the same annual rate as the number of eating establishments between the end of year 1 and the end of year 5, what was the town's population at the end of year 1 if the annual growth rate is 5.626%?

The future value interest factor is calculated as:

On a ﬁnancial calculator, the symbol "N" represents the:

Interest earned on the reinvestment of previous interest payments is called simple interest.

The I.C. James Co. invested $10,000 six years ago at 5% simple interest. The I.M. Smart Co. invested $10,000 six years ago at 5% interest which is compounded annually. Both the I.C. James Co. and the I.M. Smart Co. will earn $500 interest in the ﬁrst year.

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Filters