Question 1

The annualized return on an investment can be determined by reference to a table for the present value of $1.

Accepted Answer

A) True 
 B)False

Question 2

What is the maximum price you would pay for an investment that guarantees a payment of $1,000 a month beginning immediately lasts for 15 years and yields 12%?

Accepted Answer

A)  $84,155 
B)  $100,000 
C)  $62,832 
D)  $83,262 
A)  $84,155 
B)  $100,000 
C)  $62,832 
D)  $83,262

Question 3

To find the yield on investments that require the payment of a single amount initially,and which then return a single amount sometime in the future,the correct table to use is:

Accepted Answer

A)  the future value of $1. 
B)  the compound sum of $1. 
C)  present value of an annuity of $1. 
D)  present value of an annuity due of $1. 
A)  the future value of $1. 
B)  the compound sum of $1. 
C)  present value of an annuity of $1. 
D)  present value of an annuity due of $1.

Question 4

Cash flow decisions that ignore the time value of money will probably not be as accurate as those decisions that do rely on the time value of money.

Accepted Answer

A) True 
 B)False

Question 5

You have an opportunity to buy a $1,000 bond,which matures in 10 years.The bond pays $30 every six months.The current market interest rate is 8%.What is the most you would be willing to pay for this bond?

Accepted Answer

@#IMG-DLM& PV of face amount,Appendix B: PV = FV ×

Question 6

When the inflation rate is zero,the present value of $1 is identical to the future value of $1.

Accepted Answer

A) True 
 B)False

Question 7

Higher interest rates (discount rates)reduce the present value of amounts to be received in the future.

Accepted Answer

A) True 
 B)False

Question 8

Mr.Nailor invests $5,000 in a certificate of deposit at his local bank.He receives annual interest of 8% for 7 years.How much interest will his investment earn during this time period?

Accepted Answer

A)  $2,915 
B)  $3,569 
C)  $6,254 
D)  $8,570 
A)  $2,915 
B)  $3,569 
C)  $6,254 
D)  $8,570

Question 9

Samuel Johnson invested in gold Maple Leaf coins 10 years ago,paying $185 for each one-ounce gold coin.He could sell each coin for $734 today.What was his annual rate of return for this investment?

Accepted Answer

The answer of Samuel Johnson invested in gold Maple Leaf...

Question 10

Alternative 2 results in the lowest overall cost and lowest interest cost.A 20 year mortgage biweekly costs $216.04/month more than a 25-year but saves $64,062 over 20 years.The cost per month of bimonthly payments is also slightly lower than monthly payments.This is a good exercise to demonstrate the advantage of shorter term mortgages.
-How long does it take $1,000 to double in value if you have a
A)3% return
B)6% return
C)10% return
Assume compounding monthly.

Accepted Answer

A)23.13 ye

Question 11

The time value of money concept is fundamental to the analysis of cash inflow and outflow decisions covering periods of over one year.

Accepted Answer

A) True 
 B)False

Question 12

As the time period until receipt decreases,the present value of an amount at a fixed interest rate:

Accepted Answer

A)  decreases. 
B)  remains the same. 
C)  increases. 
D)  not enough information to tell. 
A)  decreases. 
B)  remains the same. 
C)  increases. 
D)  not enough information to tell.

Question 13

Mr.Darden is selling his house for $165,000.He bought it for $55,000 nine years ago.What is the annual return on his investment?

Accepted Answer

A)  13% 
B)  22% 
C)  33% 
D)  16% 
A)  13% 
B)  22% 
C)  33% 
D)  16%

Question 14

You can purchase a strip bond at $888 that has a term to maturity of 7 years.What would be the Yield-to-Maturity on this bond?

Accepted Answer

A)  5.71% 
B)  3.25% 
C)  1.71% 
D)  2.89% 
A)  5.71% 
B)  3.25% 
C)  1.71% 
D)  2.89%

Question 15

A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years.At the time of retirement you will have $73,425 to your credit in the plan.The plan anticipates earning 9% interest.How much will your annual benefits be?

Accepted Answer

A)  $1,435 
B)  $3,671 
C)  $6,608 
D)  $8,043 
A)  $1,435 
B)  $3,671 
C)  $6,608 
D)  $8,043

Question 16

The FVIFA for the future value of an annuity is 4.641 at 10% for 4 years.If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be?

Accepted Answer

A)  $2,500 
B)  $2,000 
C)  $1,724 
D)  $2,200 
A)  $2,500 
B)  $2,000 
C)  $1,724 
D)  $2,200

Question 17

You are to receive $12,000 at the end of 5 years.The available yield on investments is 6%.Which table would you use to determine the value of that sum today?

Accepted Answer

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

Question 18

As the interest rate decreases,the present value of an amount to be received at the end of a fixed period:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  not enough information to tell. 
A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  not enough information to tell.

Question 19

You have decided to purchase a new home valued at $300,000.You have a 20% down payment the bank has offered to finance a mortgage at a rate of 3.25% over 30 years.What would be your biweekly payments?

Accepted Answer

A)  602 
B)  $1,204 
C)  $482 
D)  $241 
A)  602 
B)  $1,204 
C)  $482 
D)  $241

Question 20

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

Accepted Answer

A) True 
 B)False

The annualized return on an investment can be determined by reference to a table for the present value of $1.

What is the maximum price you would pay for an investment that guarantees a payment of $1,000 a month beginning immediately lasts for 15 years and yields 12%?

To find the yield on investments that require the payment of a single amount initially,and which then return a single amount sometime in the future,the correct table to use is:

Cash flow decisions that ignore the time value of money will probably not be as accurate as those decisions that do rely on the time value of money.

You have an opportunity to buy a $1,000 bond,which matures in 10 years.The bond pays $30 every six months.The current market interest rate is 8%.What is the most you would be willing to pay for this bond?

When the inflation rate is zero,the present value of $1 is identical to the future value of $1.

Higher interest rates (discount rates)reduce the present value of amounts to be received in the future.

Mr.Nailor invests $5,000 in a certificate of deposit at his local bank.He receives annual interest of 8% for 7 years.How much interest will his investment earn during this time period?

Samuel Johnson invested in gold Maple Leaf coins 10 years ago,paying $185 for each one-ounce gold coin.He could sell each coin for $734 today.What was his annual rate of return for this investment?

The time value of money concept is fundamental to the analysis of cash inflow and outflow decisions covering periods of over one year.

As the time period until receipt decreases,the present value of an amount at a fixed interest rate:

Mr.Darden is selling his house for $165,000.He bought it for $55,000 nine years ago.What is the annual return on his investment?

You can purchase a strip bond at $888 that has a term to maturity of 7 years.What would be the Yield-to-Maturity on this bond?

A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years.At the time of retirement you will have $73,425 to your credit in the plan.The plan anticipates earning 9% interest.How much will your annual benefits be?

The FV_IFA for the future value of an annuity is 4.641 at 10% for 4 years.If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be?

You are to receive $12,000 at the end of 5 years.The available yield on investments is 6%.Which table would you use to determine the value of that sum today?

As the interest rate decreases,the present value of an amount to be received at the end of a fixed period:

You have decided to purchase a new home valued at $300,000.You have a 20% down payment the bank has offered to finance a mortgage at a rate of 3.25% over 30 years.What would be your biweekly payments?

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

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 annualized return on an investment can be determined by reference to a table for the present value of $1.

What is the maximum price you would pay for an investment that guarantees a payment of $1,000 a month beginning immediately lasts for 15 years and yields 12%?

To find the yield on investments that require the payment of a single amount initially,and which then return a single amount sometime in the future,the correct table to use is:

Cash flow decisions that ignore the time value of money will probably not be as accurate as those decisions that do rely on the time value of money.

You have an opportunity to buy a $1,000 bond,which matures in 10 years.The bond pays $30 every six months.The current market interest rate is 8%.What is the most you would be willing to pay for this bond?

When the inflation rate is zero,the present value of $1 is identical to the future value of $1.

Higher interest rates (discount rates)reduce the present value of amounts to be received in the future.

Mr.Nailor invests $5,000 in a certificate of deposit at his local bank.He receives annual interest of 8% for 7 years.How much interest will his investment earn during this time period?

Samuel Johnson invested in gold Maple Leaf coins 10 years ago,paying $185 for each one-ounce gold coin.He could sell each coin for $734 today.What was his annual rate of return for this investment?

The time value of money concept is fundamental to the analysis of cash inflow and outflow decisions covering periods of over one year.

As the time period until receipt decreases,the present value of an amount at a fixed interest rate:

Mr.Darden is selling his house for $165,000.He bought it for $55,000 nine years ago.What is the annual return on his investment?

You can purchase a strip bond at $888 that has a term to maturity of 7 years.What would be the Yield-to-Maturity on this bond?

A retirement plan guarantees to pay to you or your estate a fixed amount for 20 years.At the time of retirement you will have $73,425 to your credit in the plan.The plan anticipates earning 9% interest.How much will your annual benefits be?

The FVIFA for the future value of an annuity is 4.641 at 10% for 4 years.If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be?

You are to receive $12,000 at the end of 5 years.The available yield on investments is 6%.Which table would you use to determine the value of that sum today?

As the interest rate decreases,the present value of an amount to be received at the end of a fixed period:

You have decided to purchase a new home valued at $300,000.You have a 20% down payment the bank has offered to finance a mortgage at a rate of 3.25% over 30 years.What would be your biweekly payments?

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

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 FV_IFA for the future value of an annuity is 4.641 at 10% for 4 years.If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be?