Question 1

If interest rates are 9 percent, an annuity of $100 for 10 years is to be preferred to $1,000 after 10 years.​

Accepted Answer

A) True 
 B)False

Question 2

If a company paid a dividend of $1 in 2012 and the dividend grows annually by 7 percent, what will be the dividend in 2017?​

Accepted Answer

This is another example of future value:

Question 3

​Which is smallest if the interest rate is 10%?

Accepted Answer

A)  ​present value of $100 annuity for five years 
B)  ​future value of $100 annuity for five years 
C)  ​present value of $100 after five years 
D)  ​$100 received right now 
A)  ​present value of $100 annuity for five years 
B)  ​future value of $100 annuity for five years 
C)  ​present value of $100 after five years 
D)  ​$100 received right now

Question 4

You open an individual retirement account (IRA) with a mutual fund and contribute $1,000 into the account each year. How much will be in the account after 20 years if the investment earns 7% annually?

Accepted Answer

$1,000(40.995) = $40,995
40.99

Question 5

You inherit a trust account that promises to pay $13,000 a year for 10 years and then distribute $100,000. If current yields are 10 percent, what is the value of the trust?​

Accepted Answer

This problem is another illustration of

Question 6

If a creditor owes $24,000 and annually pays $3,000, how quickly will the loan be retired if the interest rate is 8 percent annually?​

Accepted Answer

This is an example of the present value

Question 7

AZ's dividend rose from $1 to $1.61 in five years. What has the dividend's annual rate of growth?​

Accepted Answer

This is an example of future value. Solv

Question 8

Discounting is​
1) the determination of present value
2) the determination of future value
3) expressing the present in the future
4) expressing the future in the present

Accepted Answer

A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4 
A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4

Question 9

Which of the following is the largest if the interest rate is 12 percent annually?​
1) $100 compounded for three years
2) $100 annuity compounded for three years
​3) the present value of $100 received after three years

Accepted Answer

A) ​1 
B) ​2 
C) ​3 
D) ​answer cannot be determined 
A) ​1 
B) ​2 
C) ​3 
D) ​answer cannot be determined

Question 10

If a person owes $50,000 at 10 percent and annually pays $10,000, the loan will be retired in 5 years.​

Accepted Answer

A) True 
 B)False

Question 11

The future value of an ordinary annuity will exceed the future value of an annuity due.​

Accepted Answer

A) True 
 B)False

Question 12

​The more frequently interest is compounded, the larger will be the final or terminal amount.

Accepted Answer

A) True 
 B)False

Question 13

If a person buys a stock for $10 and sells it after 10 years for $20, the annual compound return is 10%.​

Accepted Answer

A) True 
 B)False

Question 14

An annuity of $100 for 10 years is currently less valuable if interest rates are 10% instead of 12%.​

Accepted Answer

A) True 
 B)False

Question 15

You bought an asset for $10,000 and sold it for $20,000 after 10 years. What was the annual rate of return on this investment?​

Accepted Answer

$10,000(1 + g)10 = $20,000
​
(

Question 16

You bought a Picasso for $50,000 and sold it after 5 years for $88,000. What was the annual return on the investment?​

Accepted Answer

(1 + x)5 = $88,000/$50,000 = 1.760
x = 1

Question 17

You bought a stock for $30 and after 10 years sold it for $50. It paid an annual dividend of $2. Set up an equation that illustrates how the annual return is determined. Show that this return is not 14%.​

Accepted Answer

Does $30 = $2(PVAIF 14I, 10N) + $50(PV$I

Question 18

The future value of a dollar​
1) decreases with compounding
2) increases with compounding
3) decreases with higher interest rates
4) increases with higher interest rates

Accepted Answer

A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4 
A) ​1 and 3 
B) ​1 and 4 
C) ​2 and 3 
D) ​2 and 4

Question 19

Even if the interest rate is only 1%, a lump sum of $1,000 today is preferred to $100 a year for 10 years.​

Accepted Answer

A) True 
 B)False

Question 20

The present value of an annuity is worth more if interest rates are 5% instead of 10%.​

Accepted Answer

A) True 
 B)False

Exam 7: The Time Value of Money

If interest rates are 9 percent, an annuity of $100 for 10 years is to be preferred to $1,000 after 10 years.​

If a company paid a dividend of $1 in 2012 and the dividend grows annually by 7 percent, what will be the dividend in 2017?​

​Which is smallest if the interest rate is 10%?

You open an individual retirement account (IRA) with a mutual fund and contribute $1,000 into the account each year. How much will be in the account after 20 years if the investment earns 7% annually?

You inherit a trust account that promises to pay $13,000 a year for 10 years and then distribute $100,000. If current yields are 10 percent, what is the value of the trust?​

If a creditor owes $24,000 and annually pays $3,000, how quickly will the loan be retired if the interest rate is 8 percent annually?​

AZ's dividend rose from $1 to $1.61 in five years. What has the dividend's annual rate of growth?​

Discounting is​ 1) the determination of present value 2) the determination of future value 3) expressing the present in the future 4) expressing the future in the present

Which of the following is the largest if the interest rate is 12 percent annually?​ 1) $100 compounded for three years 2) $100 annuity compounded for three years ​3) the present value of $100 received after three years

If a person owes $50,000 at 10 percent and annually pays $10,000, the loan will be retired in 5 years.​

The future value of an ordinary annuity will exceed the future value of an annuity due.​

​The more frequently interest is compounded, the larger will be the final or terminal amount.

If a person buys a stock for $10 and sells it after 10 years for $20, the annual compound return is 10%.​

An annuity of $100 for 10 years is currently less valuable if interest rates are 10% instead of 12%.​

You bought an asset for $10,000 and sold it for $20,000 after 10 years. What was the annual rate of return on this investment?​

You bought a Picasso for $50,000 and sold it after 5 years for $88,000. What was the annual return on the investment?​

You bought a stock for $30 and after 10 years sold it for $50. It paid an annual dividend of $2. Set up an equation that illustrates how the annual return is determined. Show that this return is not 14%.​

The future value of a dollar​ 1) decreases with compounding 2) increases with compounding 3) decreases with higher interest rates 4) increases with higher interest rates

Even if the interest rate is only 1%, a lump sum of $1,000 today is preferred to $100 a year for 10 years.​

The present value of an annuity is worth more if interest rates are 5% instead of 10%.​

The Role of Financial Markets and Financial Intermediaries

Investment Banking

Securities Markets

The Federal Reserve

International Currency Flows

Risk and Its Measurement

Analysis of Financial Statements

The Features of Stock

Stock Valuation

The Features of Long-Term Debt - Bonds

Bond Pricing and Yields

Preferred Stock

Convertile Securities

Investment Returns

Investment Companies

Forms of Businss and Corporate Taxation

Break-Even Analysis and the Payback Period

Leverage

Cost of Capital

Capital Budgeting

Forecasting

Cash Budgeting

Management of Current Assets

Management of Short-Term Liabilities

Intermediate-Term Debt and Leasing

Options: Puts and Calls

Futures and Swaps

Filters

If interest rates are 9 percent, an annuity of $100 for 10 years is to be preferred to $1,000 after 10 years.

If a company paid a dividend of $1 in 2012 and the dividend grows annually by 7 percent, what will be the dividend in 2017?

Which is smallest if the interest rate is 10%?

You inherit a trust account that promises to pay $13,000 a year for 10 years and then distribute $100,000. If current yields are 10 percent, what is the value of the trust?

If a creditor owes $24,000 and annually pays $3,000, how quickly will the loan be retired if the interest rate is 8 percent annually?

AZ's dividend rose from $1 to $1.61 in five years. What has the dividend's annual rate of growth?

Discounting is 1) the determination of present value 2) the determination of future value 3) expressing the present in the future 4) expressing the future in the present

Which of the following is the largest if the interest rate is 12 percent annually? 1) $100 compounded for three years 2) $100 annuity compounded for three years 3) the present value of $100 received after three years

If a person owes $50,000 at 10 percent and annually pays $10,000, the loan will be retired in 5 years.

The future value of an ordinary annuity will exceed the future value of an annuity due.

The more frequently interest is compounded, the larger will be the final or terminal amount.

If a person buys a stock for $10 and sells it after 10 years for $20, the annual compound return is 10%.

An annuity of $100 for 10 years is currently less valuable if interest rates are 10% instead of 12%.

You bought an asset for $10,000 and sold it for $20,000 after 10 years. What was the annual rate of return on this investment?

You bought a Picasso for $50,000 and sold it after 5 years for $88,000. What was the annual return on the investment?

You bought a stock for $30 and after 10 years sold it for $50. It paid an annual dividend of $2. Set up an equation that illustrates how the annual return is determined. Show that this return is not 14%.

The future value of a dollar 1) decreases with compounding 2) increases with compounding 3) decreases with higher interest rates 4) increases with higher interest rates

Even if the interest rate is only 1%, a lump sum of $1,000 today is preferred to $100 a year for 10 years.

The present value of an annuity is worth more if interest rates are 5% instead of 10%.