Question 1

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

Accepted Answer

A) $3,728 
B) $4,042 
C) $2,676 
D) $547 
E) $625 
A) $3,728 
B) $4,042 
C) $2,676 
D) $547 
E) $625

Question 2

Ralph has decided to put $2,400 a year (at the end of each year)into an IRA over his 40 year working life and then retire. What will Ralph have at retirement if the account earns 10 percent compounded annually?

Accepted Answer

A) $394,786 
B) $23,470 
C) $1,062,223 
D) $810,917 
A) $394,786 
B) $23,470 
C) $1,062,223 
D) $810,917

Question 3

What is the present value of the following investment opportunity. You invest $10,000 now and another $10,000 in one year. In return you receive $23,000 in two years. Other opportunities available with similar risk yield about 12%.

Accepted Answer

A) $9406.60 
B) $593.40 
C) ($593.40) 
D) $8,929 
A) $9406.60 
B) $593.40 
C) ($593.40) 
D) $8,929

Question 4

The annual percentage rate considers the effects of periodic compounding.

Accepted Answer

A) True 
 B)False

Question 5

Your grandparents have just given you a $50,000 savings bond that matures in 20 years. If the discount rate is 10%, what did they pay for the bond?

Accepted Answer

A) $7,450 
B) $8,175 
C) $8,900 
D) $1,490 
A) $7,450 
B) $8,175 
C) $8,900 
D) $1,490

Question 6

What is the Present Value (PV)of the following series of cash flows using an 8% discount rate?

Accepted Answer

A) Less than $1200 
B) $1201 - $1250 
C) $1251 - $1300 
D) $1301 - $1350 
E) More than $1350 
A) Less than $1200 
B) $1201 - $1250 
C) $1251 - $1300 
D) $1301 - $1350 
E) More than $1350

Question 7

You have borrowed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly. How much total interest will you save over the life of the loan by paying an extra $200 per month loan?

Accepted Answer

A) $24,247 
B) $41,872 
C) $69,418 
D) $81,763 
A) $24,247 
B) $41,872 
C) $69,418 
D) $81,763

Question 8

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

Accepted Answer

A) 12% 
B) 11% 
C) 10% 
D) 9% 
A) 12% 
B) 11% 
C) 10% 
D) 9%

Question 9

What amount received at the end of 20-years is equivalent to $100 today, given an interest rate of 14%?

Accepted Answer

A) $87,346 
B) $1,152 
C) $1,638 
D) $1.374 
E) $91,029 
A) $87,346 
B) $1,152 
C) $1,638 
D) $1.374 
E) $91,029

Question 10

Match between columns
                        Premises: Future Value of an Annuity Due

Accepted Answer

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

Question 11

The present value of an annuity is equal to the sum of the present values of each of the cash flows in the annuity.

Accepted Answer

A) True 
 B)False

Question 12

The higher the rate of interest:

Accepted Answer

A) the larger the present value of a future sum of money. 
B) the smaller the future value of an amount invested today. 
C) the smaller the present value of a future sum of money. 
D) All of the above 
A) the larger the present value of a future sum of money. 
B) the smaller the future value of an amount invested today. 
C) the smaller the present value of a future sum of money. 
D) All of the above

Question 13

Which of the following is most correct?

Accepted Answer

A) The present value of an annuity due is always larger than the present value of an ordinary annuity with the same cash flows. 
B) The future value of an annuity due is always larger than the future value of an ordinary annuity with the same cash flows. 
C) The future value of an ordinary annuity is always larger than the future value of an annuity due with the same cash flows. 
D) Both a and b are correct. 
E) Both a and c are correct. 
A) The present value of an annuity due is always larger than the present value of an ordinary annuity with the same cash flows. 
B) The future value of an annuity due is always larger than the future value of an ordinary annuity with the same cash flows. 
C) The future value of an ordinary annuity is always larger than the future value of an annuity due with the same cash flows. 
D) Both a and b are correct. 
E) Both a and c are correct.

Question 14

The EAR associated with credit cards is actually the nominal rate and is less than the APR.

Accepted Answer

A) True 
 B)False

Question 15

Amortization debt is defined as:

Accepted Answer

A) paid as a lump sum at the end of a loan. 
B) repaid principal over the life of the loan. 
C) the death of a loan. 
D) repaid in a lump sum at the beginning of a loan. 
A) paid as a lump sum at the end of a loan. 
B) repaid principal over the life of the loan. 
C) the death of a loan. 
D) repaid in a lump sum at the beginning of a loan.

Question 16

You plan to buy a car in one year. It will cost $15,000 at that time. You now have $5,000 in a bank that pays 12% compounded monthly. You will save for the car by making monthly deposits in the bank for the next 12 months. How much will you have to deposit each month to have enough money in total to make the purchase?

Accepted Answer

A) $738.50 
B) $835.18 
C) $769.43 
D) $682.80 
A) $738.50 
B) $835.18 
C) $769.43 
D) $682.80

Question 17

A series of equal payments that occur at equal intervals and go on forever is called a(n):

Accepted Answer

A) ordinary annuity. 
B) annuity due. 
C) perpetuity. 
D) non-ending stream. 
E) None of the above 
A) ordinary annuity. 
B) annuity due. 
C) perpetuity. 
D) non-ending stream. 
E) None of the above

Question 18

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Accepted Answer

A) $122.44 
B) $222.44 
C) $168.38 
D) $187.28 
A) $122.44 
B) $222.44 
C) $168.38 
D) $187.28

Question 19

Jane wants to have $200,000 in an account in 20 years. If it earns 11 percent per annum over the accumulation period, how much must she save per year (end of year)to have the $200,000?

Accepted Answer

A) $25,116 
B) $3,115 
C) $10,000 
D) $3,492 
A) $25,116 
B) $3,115 
C) $10,000 
D) $3,492

Question 20

Your local bank offers 4-year certificates of deposit (CDs)12 % compounded quarterly. How much additional interest will you earn over 4 years on a $10,000 CD that is compounded quarterly, compared with one that is compounded annually?

Accepted Answer

A) $6,050 
B) $0 
C) $312 
D) $220 
A) $6,050 
B) $0 
C) $312 
D) $220

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

Ralph has decided to put $2,400 a year (at the end of each year)into an IRA over his 40 year working life and then retire. What will Ralph have at retirement if the account earns 10 percent compounded annually?

What is the present value of the following investment opportunity. You invest $10,000 now and another $10,000 in one year. In return you receive $23,000 in two years. Other opportunities available with similar risk yield about 12%.

The annual percentage rate considers the effects of periodic compounding.

Your grandparents have just given you a $50,000 savings bond that matures in 20 years. If the discount rate is 10%, what did they pay for the bond?

What is the Present Value (PV)of the following series of cash flows using an 8% discount rate?

You have borrowed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly. How much total interest will you save over the life of the loan by paying an extra $200 per month loan?

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

What amount received at the end of 20-years is equivalent to $100 today, given an interest rate of 14%?

The present value of an annuity is equal to the sum of the present values of each of the cash flows in the annuity.

The higher the rate of interest:

Which of the following is most correct?

The EAR associated with credit cards is actually the nominal rate and is less than the APR.

Amortization debt is defined as:

A series of equal payments that occur at equal intervals and go on forever is called a(n):

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Jane wants to have $200,000 in an account in 20 years. If it earns 11 percent per annum over the accumulation period, how much must she save per year (end of year)to have the $200,000?

Your local bank offers 4-year certificates of deposit (CDs)12 % compounded quarterly. How much additional interest will you earn over 4 years on a $10,000 CD that is compounded quarterly, compared with one that is compounded annually?

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

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

Ralph has decided to put $2,400 a year (at the end of each year)into an IRA over his 40 year working life and then retire. What will Ralph have at retirement if the account earns 10 percent compounded annually?

What is the present value of the following investment opportunity. You invest $10,000 now and another $10,000 in one year. In return you receive $23,000 in two years. Other opportunities available with similar risk yield about 12%.

The annual percentage rate considers the effects of periodic compounding.

Your grandparents have just given you a $50,000 savings bond that matures in 20 years. If the discount rate is 10%, what did they pay for the bond?

What is the Present Value (PV)of the following series of cash flows using an 8% discount rate?

You have borrowed $130,000 to buy a new motor home. Your loan is to be repaid over 15 years at 8% compounded monthly. How much total interest will you save over the life of the loan by paying an extra $200 per month loan?

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

What amount received at the end of 20-years is equivalent to $100 today, given an interest rate of 14%?

The present value of an annuity is equal to the sum of the present values of each of the cash flows in the annuity.

The higher the rate of interest:

Which of the following is most correct?

The EAR associated with credit cards is actually the nominal rate and is less than the APR.

Amortization debt is defined as:

A series of equal payments that occur at equal intervals and go on forever is called a(n):

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Jane wants to have $200,000 in an account in 20 years. If it earns 11 percent per annum over the accumulation period, how much must she save per year (end of year)to have the $200,000?

Your local bank offers 4-year certificates of deposit (CDs)12 % compounded quarterly. How much additional interest will you earn over 4 years on a $10,000 CD that is compounded quarterly, compared with one that is compounded annually?

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