Question 1

"Term" is defined as:

Accepted Answer

A) a number of years. 
B) an annuity. 
C) a period of time. 
D) when an annuity is calculated. 
A) a number of years. 
B) an annuity. 
C) a period of time. 
D) when an annuity is calculated. C

Question 2

Which of the following statements about time lines is false?

Accepted Answer

A) A time line is a graphic portrayal of a time value problem. 
B) Time zero is the present point in time. 
C) Future time periods are to the right of zero. 
D) Time is portrayed along a vertical line. 
A) A time line is a graphic portrayal of a time value problem. 
B) Time zero is the present point in time. 
C) Future time periods are to the right of zero. 
D) Time is portrayed along a vertical line. D

Question 3

The present value factor (PVF)and the future value factor (FVF)are related:

Accepted Answer

A) exponentially. 
B) arithmetically. 
C) as reciprocals. 
D) as compliments. 
A) exponentially. 
B) arithmetically. 
C) as reciprocals. 
D) as compliments. C

Question 4

Each year a company is required to place money into a bank account to retire its bond's principal at maturity. If the bond's principal is $10 million, and bank interest is estimated at 8%, how much are the annual payments if they are to be made over the last 20 years of the bond's life?

Accepted Answer

A) $101,853 
B) $218,522 
C) $462,950 
D) $425,387 
A) $101,853 
B) $218,522 
C) $462,950 
D) $425,387

Question 5

Holding all other variables constant, an increase in the ____ will increase the future value of an annuity.

Accepted Answer

A) annuity payment 
B) rate of interest 
C) number of periods 
D) Both a & b 
E) All of the above 
A) annuity payment 
B) rate of interest 
C) number of periods 
D) Both a & b 
E) All of the above

Question 6

You are considering an investment that will pay you $100 in Year 1, $500 in Year 2, $0 in Year 3 and $600 in Year 4. If you require a 12% return, what is the most you should pay for this investment today? (Round to nearest $)

Accepted Answer

A) $915 
B) $869 
C) $734 
D) $698 
A) $915 
B) $869 
C) $734 
D) $698

Question 7

A friend offered to pay you $3,000 for each of the next three years beginning one year from now, $5,000 for each of the succeeding three years, and a lump sum of $10,000 one year thereafter. The interest rate is 10%. How much are these expected future sums worth today?

Accepted Answer

A) $30,909 
B) $21,935 
C) $17,447 
D) None of the above 
A) $30,909 
B) $21,935 
C) $17,447 
D) None of the above

Question 8

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

Accepted Answer

A) $5,526 
B) $784 
C) $1,400 
D) $1,469 
A) $5,526 
B) $784 
C) $1,400 
D) $1,469

Question 9

What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?

Accepted Answer

A) $2,225 
B) $3,863 
C) $2,385 
D) $1,917 
E) $2,000 
A) $2,225 
B) $3,863 
C) $2,385 
D) $1,917 
E) $2,000

Question 10

If $10,000 per year is deposited at 8% starting today and at the beginning of each of the next five years (6 deposits), the amount on deposit will be:

Accepted Answer

A) $46,229. 
B) $73,359. 
C) $49,927. 
D) $79,228. 
A) $46,229. 
B) $73,359. 
C) $49,927. 
D) $79,228.

Question 11

Your lifetime financial goal is to have $1,250,000 invested in a mutual fund when you retire in 40 years. You plan to invest $1,000 in a mutual fund now, and then invest an additional $200 per quarter for 40 years. What average return must the fund provide to meet your investment goal?

Accepted Answer

A) 8.34% 
B) 10.44% 
C) 12.13% 
D) 13.16% 
A) 8.34% 
B) 10.44% 
C) 12.13% 
D) 13.16%

Question 12

A four-year annuity of $1,000 annual payments at the end of each year, with a 10% interest rate is worth how much today?

Accepted Answer

A) $2,914.67 
B) $3,486.85 
C) $3,169.87 
D) None of the above 
A) $2,914.67 
B) $3,486.85 
C) $3,169.87 
D) None of the above

Question 13

What present amount is equivalent to $100 received at the end of 5 years, given an interest rate of 16%?

Accepted Answer

A) $47.60 
B) $327.40 
C) $40.20 
D) $163.60 
E) $32.30 
A) $47.60 
B) $327.40 
C) $40.20 
D) $163.60 
E) $32.30

Question 14

The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank charging you?

Accepted Answer

A) 10% 
B) 11% 
C) 12% 
D) 13% 
A) 10% 
B) 11% 
C) 12% 
D) 13%

Question 15

If you owe $1,200.00, which is the most advantageous way to pay it back assuming a 12% APR discount rate?

Accepted Answer

A) $100.00 monthly payments over the next twelve months 
B) $300.00 quarterly payments over the next four quarters 
C) $600.00 paid every six months over the next year 
D) $1,200.00 paid after one year 
A) $100.00 monthly payments over the next twelve months 
B) $300.00 quarterly payments over the next four quarters 
C) $600.00 paid every six months over the next year 
D) $1,200.00 paid after one year

Question 16

The present value of an investment will always be larger than its expected future value when interest is compounded.

Accepted Answer

A) True 
 B)False

Question 17

Match between columns
                        Premises: Future Value of an Ordinary Annuity

Accepted Answer

The Answer of PMT[FVFAS1U1B1k,nS1U1B0] (1+k) and PMT[FVFAS1U1B1k,nS1U1B0] and PMT[PVFAS1U1B1k,nS1U1B0] (1+k) is...

Question 18

Jackson purchased a home with a 30-year, 6% compounded monthly mortgage loan for $375,000. How much will he pay the bank in the loan's first year?

Accepted Answer

A) ​$809,391 
B) ​$26,980 
C) ​$2,248 
D) ​$434,391 
A) ​$809,391 
B) ​$26,980 
C) ​$2,248 
D) ​$434,391

Question 19

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

Accepted Answer

A) $2,137.50 
B) $1,000.00 
C) $1,666.67 
D) $1,333.33 
A) $2,137.50 
B) $1,000.00 
C) $1,666.67 
D) $1,333.33

Question 20

Find the present value of a payment stream of $100 per year for the first fifteen years and $200 per year for the next five years, given a 12% discount rate.

Accepted Answer

A) $813 
B) $1,402 
C) $953 
D) $887 
E) $712 
A) $813 
B) $1,402 
C) $953 
D) $887 
E) $712

"Term" is defined as:

Which of the following statements about time lines is false?

The present value factor (PVF)and the future value factor (FVF)are related:

Each year a company is required to place money into a bank account to retire its bond's principal at maturity. If the bond's principal is $10 million, and bank interest is estimated at 8%, how much are the annual payments if they are to be made over the last 20 years of the bond's life?

Holding all other variables constant, an increase in the ____ will increase the future value of an annuity.

You are considering an investment that will pay you $100 in Year 1, $500 in Year 2, $0 in Year 3 and $600 in Year 4. If you require a 12% return, what is the most you should pay for this investment today? (Round to nearest $)

A friend offered to pay you $3,000 for each of the next three years beginning one year from now, $5,000 for each of the succeeding three years, and a lump sum of $10,000 one year thereafter. The interest rate is 10%. How much are these expected future sums worth today?

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?

If $10,000 per year is deposited at 8% starting today and at the beginning of each of the next five years (6 deposits), the amount on deposit will be:

Your lifetime financial goal is to have $1,250,000 invested in a mutual fund when you retire in 40 years. You plan to invest $1,000 in a mutual fund now, and then invest an additional $200 per quarter for 40 years. What average return must the fund provide to meet your investment goal?

A four-year annuity of $1,000 annual payments at the end of each year, with a 10% interest rate is worth how much today?

What present amount is equivalent to $100 received at the end of 5 years, given an interest rate of 16%?

The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank charging you?

If you owe $1,200.00, which is the most advantageous way to pay it back assuming a 12% APR discount rate?

The present value of an investment will always be larger than its expected future value when interest is compounded.

Jackson purchased a home with a 30-year, 6% compounded monthly mortgage loan for $375,000. How much will he pay the bank in the loan's first year?

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

Find the present value of a payment stream of $100 per year for the first fifteen years and $200 per year for the next five years, given a 12% discount rate.

Foundations

Financial Background: a Review of Accounting Financial Statements and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System Corporate Governance and Interest

The Valuation and Characteristics of Bonds and Leasing

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends and Repurchases

The Management of Working Capital

Corporate Restructuring

International Finance

Filters

Exam 6: Time Value of Money

"Term" is defined as:

Which of the following statements about time lines is false?

The present value factor (PVF)and the future value factor (FVF)are related:

Each year a company is required to place money into a bank account to retire its bond's principal at maturity. If the bond's principal is $10 million, and bank interest is estimated at 8%, how much are the annual payments if they are to be made over the last 20 years of the bond's life?

Holding all other variables constant, an increase in the ____ will increase the future value of an annuity.

You are considering an investment that will pay you $100 in Year 1, $500 in Year 2, $0 in Year 3 and $600 in Year 4. If you require a 12% return, what is the most you should pay for this investment today? (Round to nearest $)

A friend offered to pay you $3,000 for each of the next three years beginning one year from now, $5,000 for each of the succeeding three years, and a lump sum of $10,000 one year thereafter. The interest rate is 10%. How much are these expected future sums worth today?

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

What is the amount of the equal annual installments for a 10-year, $10,000 loan with a 20% rate of interest?

If $10,000 per year is deposited at 8% starting today and at the beginning of each of the next five years (6 deposits), the amount on deposit will be:

Your lifetime financial goal is to have $1,250,000 invested in a mutual fund when you retire in 40 years. You plan to invest $1,000 in a mutual fund now, and then invest an additional $200 per quarter for 40 years. What average return must the fund provide to meet your investment goal?

A four-year annuity of $1,000 annual payments at the end of each year, with a 10% interest rate is worth how much today?

What present amount is equivalent to $100 received at the end of 5 years, given an interest rate of 16%?

The First National Bank has agreed to lend you $30,000 today, but you must repay $42,135 in 3 years. What rate is the bank charging you?

If you owe $1,200.00, which is the most advantageous way to pay it back assuming a 12% APR discount rate?

The present value of an investment will always be larger than its expected future value when interest is compounded.

Jackson purchased a home with a 30-year, 6% compounded monthly mortgage loan for $375,000. How much will he pay the bank in the loan's first year?

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

Find the present value of a payment stream of $100 per year for the first fifteen years and $200 per year for the next five years, given a 12% discount rate.

Foundations

Financial Background: a Review of Accounting Financial Statements and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System Corporate Governance and Interest

The Valuation and Characteristics of Bonds and Leasing

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends and Repurchases

The Management of Working Capital

Corporate Restructuring

International Finance

Filters