Question 1

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

Accepted Answer

A) True 
 B)False

Question 2

When using a present value of an annuity table:

Accepted Answer

A) payments are assumed to be made at the beginning of each period. 
B) PVFA factors decrease with an increase in the interest rate. 
C) PVFA factors increase with an increase in the number of periods. 
D) b and c only 
A) payments are assumed to be made at the beginning of each period. 
B) PVFA factors decrease with an increase in the interest rate. 
C) PVFA factors increase with an increase in the number of periods. 
D) b and c only

Question 3

Amy will deposit $5,000 a year into an IRA for the next 30 years.  How much will Amy have if the IRA earns 7%? ​

Accepted Answer

A) ​$38,061 
B) ​$472,304 
C) ​$62,045 
D) ​$505,365 
A) ​$38,061 
B) ​$472,304 
C) ​$62,045 
D) ​$505,365

Question 4

An annuity is a series of equal payments separated by equal time intervals.

Accepted Answer

A) True 
 B)False

Question 5

A perpetuity is a stream of:

Accepted Answer

A) regular payments that go on forever. 
B) irregular payments for a period of time. 
C) payments for their present value. 
D) payments tomorrow. 
A) regular payments that go on forever. 
B) irregular payments for a period of time. 
C) payments for their present value. 
D) payments tomorrow.

Question 6

Your bank pays a quoted annual (nominal)rate of 12%. However, it compounds interest every week (52 times a year). What is the effective annual rate (EAR)?

Accepted Answer

A) Less than 12% 
B) Exactly 12% 
C) 12.01% - 12.35% 
D) 12.36% - 12.70% 
E) More than 12.70% 
A) Less than 12% 
B) Exactly 12% 
C) 12.01% - 12.35% 
D) 12.36% - 12.70% 
E) More than 12.70%

Question 7

Under which compounding frequency will you earn the most on an investment receiving 12% APR in interest?

Accepted Answer

A) Monthly 
B) Quarterly 
C) Semi-annually 
D) Annually 
A) Monthly 
B) Quarterly 
C) Semi-annually 
D) Annually

Question 8

Effective annual rates decrease as ____ decrease:

Accepted Answer

A) annual percentage rates 
B) number of compounding periods 
C) quoted rates 
D) All of the above 
A) annual percentage rates 
B) number of compounding periods 
C) quoted rates 
D) All of the above

Question 9

The ____ of a resource is the benefit that would have been available from its next best use.

Accepted Answer

A) opportunity cost 
B) present value 
C) future value 
D) all of the above 
E) none of the above 
A) opportunity cost 
B) present value 
C) future value 
D) all of the above 
E) none of the above

Question 10

Find the present value of $100 to be received at the end of two years if the discount rate is 12% compounded monthly.

Accepted Answer

A) $66.50 
B) $78.76 
C) $68.80 
D) $91.80 
E) $79.75 
A) $66.50 
B) $78.76 
C) $68.80 
D) $91.80 
E) $79.75

Question 11

The present value factor is also known as the discount factor.

Accepted Answer

A) True 
 B)False

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

When using a present value of an annuity table:

Amy will deposit $5,000 a year into an IRA for the next 30 years. How much will Amy have if the IRA earns 7%?

An annuity is a series of equal payments separated by equal time intervals.

A perpetuity is a stream of:

Your bank pays a quoted annual (nominal)rate of 12%. However, it compounds interest every week (52 times a year). What is the effective annual rate (EAR)?

Under which compounding frequency will you earn the most on an investment receiving 12% APR in interest?

Effective annual rates decrease as ____ decrease:

The ____ of a resource is the benefit that would have been available from its next best use.

Find the present value of $100 to be received at the end of two years if the discount rate is 12% compounded monthly.

The present value factor is also known as the discount factor.

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

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

When using a present value of an annuity table:

Amy will deposit $5,000 a year into an IRA for the next 30 years. How much will Amy have if the IRA earns 7%? ​

An annuity is a series of equal payments separated by equal time intervals.

A perpetuity is a stream of:

Your bank pays a quoted annual (nominal)rate of 12%. However, it compounds interest every week (52 times a year). What is the effective annual rate (EAR)?

Under which compounding frequency will you earn the most on an investment receiving 12% APR in interest?

Effective annual rates decrease as ____ decrease:

The ____ of a resource is the benefit that would have been available from its next best use.

Find the present value of $100 to be received at the end of two years if the discount rate is 12% compounded monthly.

The present value factor is also known as the discount factor.

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

Amy will deposit $5,000 a year into an IRA for the next 30 years. How much will Amy have if the IRA earns 7%?