Question 1

The present value of a positive future value may become negative as discount rates become higher and higher.

Accepted Answer

A) True 
 B)False  False

Question 2

In evaluating capital investment projects,current outlays must be judged against the current value of future benefits.

Accepted Answer

A) True 
 B)False  True

Question 3

If you were to put $1,000 in the bank at 6% interest each year for the next 10 years,which table would you use to find the ending balance in your account?

Accepted Answer

A)  Present value of $1 
B)  Future value of $1 
C)  Present value of an annuity of $1 
D)  Compound sum of an annuity of $1 
A)  Present value of $1 
B)  Future value of $1 
C)  Present value of an annuity of $1 
D)  Compound sum of an annuity of $1 D

Question 4

What is the difference between a nominal interest rate and an effective interest rate?

Accepted Answer

Interest rates are most commonly express

Question 5

Yield is defined as the interest rate that equates a future value of an annuity to a given present value.

Accepted Answer

A) True 
 B)False

Question 6

As the discount rate becomes higher and higher,the present value of inflows approaches:

Accepted Answer

A)  zero. 
B)  minus infinity. 
C)  plus infinity. 
D)  need more information. 
A)  zero. 
B)  minus infinity. 
C)  plus infinity. 
D)  need more information.

Question 7

The interest factor for the future value of an annuity is simply the sum of the interest factors for the future value using the same number of periods.

Accepted Answer

A) True 
 B)False

Question 8

If an individual's cost of capital were 10%,he or she would prefer to receive $107 at the end of one year rather than $100 right now.

Accepted Answer

A) True 
 B)False

Question 9

The formula FV = PV (1 + n)i will determine the present value of $1.

Accepted Answer

A) True 
 B)False

Question 10

Pension fund retirement accounts use the present value of an annuity to calculate the ending value upon retirement.

Accepted Answer

A) True 
 B)False

Question 11

You will deposit $10,000 today.It will grow for 10 years at 10% interest compounded monthly.You will then withdraw the funds quarterly over the next 4 years.The annual interest rate over those 4 years is 8%.Your annual withdrawal will be:

Accepted Answer

A)  $1691.90. 
B)  $1993.74. 
C)  $1789.37. 
D)  $660.87. 
A)  $1691.90. 
B)  $1993.74. 
C)  $1789.37. 
D)  $660.87.

Question 12

You will deposit $2,000 today.It will grow for 6 years at 10% interest compounded semiannually.You will then withdraw the funds annually over the next 4 years.The annual interest rate is 8%.Your annual withdrawal will be:

Accepted Answer

A)  $2,340 
B)  $4,332 
C)  $797 
D)  $1,084 
A)  $2,340 
B)  $4,332 
C)  $797 
D)  $1,084

Question 13

The interest factor for a future value (FVIF)is equal to (1 + i)n.

Accepted Answer

A) True 
 B)False

Question 14

If you were to put $5,000 in the bank at 4% interest each year for the next 8 years,which table would you use to find the ending balance in your account?

Accepted Answer

A)  Present value of $1 
B)  Future value of $1 
C)  Present value of an annuity of $1 
D)  Future value of an annuity of $1 
A)  Present value of $1 
B)  Future value of $1 
C)  Present value of an annuity of $1 
D)  Future value of an annuity of $1

Question 15

The future value is the same concept as the way money grows in a bank account.

Accepted Answer

A) True 
 B)False

Question 16

As the interest rate increases,the PVIF for the present value of $1 increases.

Accepted Answer

A) True 
 B)False

Question 17

If a single amount were put on deposit at a given interest rate and allowed to grow,its future value could be determined by reference to the future value of $1 table.

Accepted Answer

A) True 
 B)False

Question 18

Lou Lewis borrows $10,000 to be repaid over 10 years with equal annual payments at 9 percent.Repayment of principal in the first year is:

Accepted Answer

A)  $1,558.20. 
B)  $1,000.00. 
C)  $900.00. 
D)  $658.20. 
A)  $1,558.20. 
B)  $1,000.00. 
C)  $900.00. 
D)  $658.20.

Question 19

Sara Shouppe has invested $100,000 in an account at her local bank.The bank will pay her a constant amount each year for 6 years,starting one year from today,and the account's balance will be 0 at the end of the sixth year.If the bank has promised Ms.Shouppe a 10% return,how much will they have to pay her each year?

Accepted Answer

The answer of Sara Shouppe has invested $100,000 in an...

Question 20

An annuity may be defined as:

Accepted Answer

A)  a payment at a fixed interest rate. 
B)  a series of payments of unequal amount. 
C)  a series of yearly payments. 
D)  a series of consecutive payments or receipts of equal amounts. 
A)  a payment at a fixed interest rate. 
B)  a series of payments of unequal amount. 
C)  a series of yearly payments. 
D)  a series of consecutive payments or receipts of equal amounts.

The present value of a positive future value may become negative as discount rates become higher and higher.

In evaluating capital investment projects,current outlays must be judged against the current value of future benefits.

If you were to put $1,000 in the bank at 6% interest each year for the next 10 years,which table would you use to find the ending balance in your account?

What is the difference between a nominal interest rate and an effective interest rate?

Yield is defined as the interest rate that equates a future value of an annuity to a given present value.

As the discount rate becomes higher and higher,the present value of inflows approaches:

The interest factor for the future value of an annuity is simply the sum of the interest factors for the future value using the same number of periods.

If an individual's cost of capital were 10%,he or she would prefer to receive $107 at the end of one year rather than $100 right now.

The formula FV = PV (1 + n)ⁱ will determine the present value of $1.

Pension fund retirement accounts use the present value of an annuity to calculate the ending value upon retirement.

You will deposit $10,000 today.It will grow for 10 years at 10% interest compounded monthly.You will then withdraw the funds quarterly over the next 4 years.The annual interest rate over those 4 years is 8%.Your annual withdrawal will be:

You will deposit $2,000 today.It will grow for 6 years at 10% interest compounded semiannually.You will then withdraw the funds annually over the next 4 years.The annual interest rate is 8%.Your annual withdrawal will be:

The interest factor for a future value (FV_IF)is equal to (1 + i)ⁿ.

If you were to put $5,000 in the bank at 4% interest each year for the next 8 years,which table would you use to find the ending balance in your account?

The future value is the same concept as the way money grows in a bank account.

As the interest rate increases,the PV_IF for the present value of $1 increases.

If a single amount were put on deposit at a given interest rate and allowed to grow,its future value could be determined by reference to the future value of $1 table.

Lou Lewis borrows $10,000 to be repaid over 10 years with equal annual payments at 9 percent.Repayment of principal in the first year is:

An annuity may be defined as:

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters

Exam 9: The Time Value of Money

The present value of a positive future value may become negative as discount rates become higher and higher.

In evaluating capital investment projects,current outlays must be judged against the current value of future benefits.

If you were to put $1,000 in the bank at 6% interest each year for the next 10 years,which table would you use to find the ending balance in your account?

What is the difference between a nominal interest rate and an effective interest rate?

Yield is defined as the interest rate that equates a future value of an annuity to a given present value.

As the discount rate becomes higher and higher,the present value of inflows approaches:

The interest factor for the future value of an annuity is simply the sum of the interest factors for the future value using the same number of periods.

If an individual's cost of capital were 10%,he or she would prefer to receive $107 at the end of one year rather than $100 right now.

The formula FV = PV (1 + n)i will determine the present value of $1.

Pension fund retirement accounts use the present value of an annuity to calculate the ending value upon retirement.

You will deposit $10,000 today.It will grow for 10 years at 10% interest compounded monthly.You will then withdraw the funds quarterly over the next 4 years.The annual interest rate over those 4 years is 8%.Your annual withdrawal will be:

You will deposit $2,000 today.It will grow for 6 years at 10% interest compounded semiannually.You will then withdraw the funds annually over the next 4 years.The annual interest rate is 8%.Your annual withdrawal will be:

The interest factor for a future value (FVIF)is equal to (1 + i)n.

If you were to put $5,000 in the bank at 4% interest each year for the next 8 years,which table would you use to find the ending balance in your account?

The future value is the same concept as the way money grows in a bank account.

As the interest rate increases,the PVIF for the present value of $1 increases.

If a single amount were put on deposit at a given interest rate and allowed to grow,its future value could be determined by reference to the future value of $1 table.

Lou Lewis borrows $10,000 to be repaid over 10 years with equal annual payments at 9 percent.Repayment of principal in the first year is:

An annuity may be defined as:

The Goals and Activities of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants and Derivatives

External Growth Through Mergers

International Financial Management

Filters

The formula FV = PV (1 + n)ⁱ will determine the present value of $1.

The interest factor for a future value (FV_IF)is equal to (1 + i)ⁿ.

As the interest rate increases,the PV_IF for the present value of $1 increases.