Question 1

$1,000 deposited in a bank that earns 7% per year will become approximately $7,600 in 30 years.

Accepted Answer

A) True 
 B)False

Question 2

The present value of a $100 deposit in 10 years at 10% is $38.55.

Accepted Answer

A) True 
 B)False

Question 3

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

Accepted Answer

A)  changes proportionally. 
B)  increases. 
C)  decreases. 
D)  remains unchanged. 
A)  changes proportionally. 
B)  increases. 
C)  decreases. 
D)  remains unchanged.

Question 4

The future value of $100 received today and deposited at 6 percent for four years is

Accepted Answer

A)  $126. 
B)  $ 79. 
C)  $124. 
D)  $116. 
A)  $126. 
B)  $ 79. 
C)  $124. 
D)  $116.

Question 5

An annuity is a series of equal payments that occur over a number of time periods.

Accepted Answer

A) True 
 B)False

Question 6

The future value of a dollar ________ as the interest rate increases and ________ the farther in the future is the funds are to be received.

Accepted Answer

A)  decreases; decreases. 
B)  decreases; increases. 
C)  increases; increases. 
D)  increases; decreases. 
A)  decreases; decreases. 
B)  decreases; increases. 
C)  increases; increases. 
D)  increases; decreases.

Question 7

Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly. How much will she have in her account after five years?

Accepted Answer

A)  $1,200.50 
B)  $1,220.20 
C)  $1,174.80 
D)  $1,217.50 
A)  $1,200.50 
B)  $1,220.20 
C)  $1,174.80 
D)  $1,217.50

Question 8

The interest portion increases and the principal portion decreases over time under a typical loan amortization schedule.

Accepted Answer

A) True 
 B)False

Question 9

If an investment pays 6% interest and you invest $100,000, about how long will it take you to double your money?

Accepted Answer

A)  6 years 
B)  7 years 
C)  8 years 
D)  9 years 
A)  6 years 
B)  7 years 
C)  8 years 
D)  9 years

Question 10

Stephen would like to send his parents on a cruise for their 25th wedding anniversary. He expects the cruise will cost $15,000 and he has 5 years to accumulate this money. How much must Stephen deposit annually in an account paying 10 percent interest in order to have enough money to send his parents on the cruise?

Accepted Answer

A)  $1,862 
B)  $2,457 
C)  $3,000 
D)  $2,234 
A)  $1,862 
B)  $2,457 
C)  $3,000 
D)  $2,234

Question 11

Assume JP Morgan has a choice between two deposit accounts. Account A has an annual percentage rate of 7.55 percent but with interest compounded monthly. Account B has an annual percentage rate of 7.45 percent with interest compounded quarterly. Which account provides the highest effective annual return?

Accepted Answer

A)  Account A 
B)  Account B 
C)  Both provide the same effective annual return. 
D)  We don't have sufficient information to make a choice. 
A)  Account A 
B)  Account B 
C)  Both provide the same effective annual return. 
D)  We don't have sufficient information to make a choice.

Question 12

Which of the following terms best describes an annuity due?

Accepted Answer

A)  a perpetuity 
B)  unequal payments 
C)  payment at beginning of year 
D)  payment at the end of the year 
A)  a perpetuity 
B)  unequal payments 
C)  payment at beginning of year 
D)  payment at the end of the year

Question 13

If I earn 3% on my deposit of $500, it will take 9 years before I have $550.

Accepted Answer

A) True 
 B)False

Question 14

If the APR is 12% and interest is compounded monthly, then the EAR is:

Accepted Answer

A)  12.00% 
B)  1.00% 
C)  12.68%% 
D)  13.0% 
A)  12.00% 
B)  1.00% 
C)  12.68%% 
D)  13.0%

Question 15

An annuity due may also be referred to as a deferred annuity.

Accepted Answer

A) True 
 B)False

Question 16

Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate.

Accepted Answer

A) True 
 B)False

Question 17

An amortized loan is repaid in equal payments over a specified time period.

Accepted Answer

A) True 
 B)False

Question 18

The return provided by $100 deposited for 10 years that results in a future value of $614.46 is 19.91%.

Accepted Answer

A) True 
 B)False

Question 19

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is

Accepted Answer

A)  $288 
B)  $1,896. 
C)  $1,750. 
D)  $1,558. 
A)  $288 
B)  $1,896. 
C)  $1,750. 
D)  $1,558.

Question 20

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

Accepted Answer

A)  annual percentage rate 
B)  compound rate of interest 
C)  stated rate of interest 
D)  effective annual rate 
A)  annual percentage rate 
B)  compound rate of interest 
C)  stated rate of interest 
D)  effective annual rate

$1,000 deposited in a bank that earns 7% per year will become approximately $7,600 in 30 years.

The present value of a $100 deposit in 10 years at 10% is $38.55.

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

The future value of $100 received today and deposited at 6 percent for four years is

An annuity is a series of equal payments that occur over a number of time periods.

The future value of a dollar as the interest rate increases and the farther in the future is the funds are to be received.

Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly. How much will she have in her account after five years?

The interest portion increases and the principal portion decreases over time under a typical loan amortization schedule.

If an investment pays 6% interest and you invest $100,000, about how long will it take you to double your money?

Which of the following terms best describes an annuity due?

If I earn 3% on my deposit of $500, it will take 9 years before I have $550.

If the APR is 12% and interest is compounded monthly, then the EAR is:

An annuity due may also be referred to as a deferred annuity.

Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate.

An amortized loan is repaid in equal payments over a specified time period.

The return provided by $100 deposited for 10 years that results in a future value of $614.46 is 19.91%.

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 9: Time Value of Money

$1,000 deposited in a bank that earns 7% per year will become approximately $7,600 in 30 years.

The present value of a $100 deposit in 10 years at 10% is $38.55.

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

The future value of $100 received today and deposited at 6 percent for four years is

An annuity is a series of equal payments that occur over a number of time periods.

The future value of a dollar ________ as the interest rate increases and ________ the farther in the future is the funds are to be received.

Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly. How much will she have in her account after five years?

The interest portion increases and the principal portion decreases over time under a typical loan amortization schedule.

If an investment pays 6% interest and you invest $100,000, about how long will it take you to double your money?

Which of the following terms best describes an annuity due?

If I earn 3% on my deposit of $500, it will take 9 years before I have $550.

If the APR is 12% and interest is compounded monthly, then the EAR is:

An annuity due may also be referred to as a deferred annuity.

Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate.

An amortized loan is repaid in equal payments over a specified time period.

The return provided by $100 deposited for 10 years that results in a future value of $614.46 is 19.91%.

The present value of an ordinary annuity of $350 each year for five years, assuming an opportunity cost of 4 percent, is

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

The future value of a dollar as the interest rate increases and the farther in the future is the funds are to be received.