Question 1

The payment or receipt of a series of equal cash flows per period, at the end of each period, for a specified amount of time is called a(n):

Accepted Answer

A) annuity due 
B) perpetuity 
C) ordinary annuity 
D) simple interest 
A) annuity due 
B) perpetuity 
C) ordinary annuity 
D) simple interest

Question 2

An annuity that begins more than 1 year in the future is referred to as a(n) .

Accepted Answer

A) perpetuity 
B) annuity due 
C) uneven annuity 
D) deferred annuity 
A) perpetuity 
B) annuity due 
C) uneven annuity 
D) deferred annuity

Question 3

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190.What was your 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 4

Seebee makes quarterly (end of period) payments of $30,000 into a pension fund earning 12 percent per year compounded quarterly for 10 years.How much interest will they have earned in 10 years?

Accepted Answer

A) $2,262,030 
B) $2,105,880 
C) $905,880 
D) $1,062,030 
A) $2,262,030 
B) $2,105,880 
C) $905,880 
D) $1,062,030

Question 5

Inco purchased a computer for $200,000 and this machine is expected to generate annual cash flows of $48,271 over the next 5 years.What is the expected rate of return on this investment?

Accepted Answer

A) 8.84% 
B) 26.58% 
C) 6.61% 
D) none of these 
A) 8.84% 
B) 26.58% 
C) 6.61% 
D) none of these

Question 6

Determine how much you would be willing to pay for a bond that pays $60 annual interest indefinitely and never matures (i.e., a perpetuity), assuming you require an 8 percent rate of return on this investment.

Accepted Answer

A) $480 
B) $743 
C) $1,000 
D) $750 
A) $480 
B) $743 
C) $1,000 
D) $750

Question 7

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 8

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

Accepted Answer

A) $1,569,758 
B) $68,613 
C) $3,457,169 
D) $1,148,958 
A) $1,569,758 
B) $68,613 
C) $3,457,169 
D) $1,148,958

Question 9

A(n) is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e.forever).

Accepted Answer

A) annuity 
B) annuity due 
C) sinking fund 
D) perpetuity 
A) annuity 
B) annuity due 
C) sinking fund 
D) perpetuity

Question 10

You have just won a $50,000 bond that pays no interest and matures in 20 years.If the discount rate is 10%, what is the present value of your 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 11

Annuity due calculations are most common when dealing with:

Accepted Answer

A) cash dividends 
B) loan repayments 
C) lease contracts 
D) interest payments 
A) cash dividends 
B) loan repayments 
C) lease contracts 
D) interest payments

Question 12

Designs Now is opening a showcase office to display and sell its computer designed poster art.Designs expects cash flows to be $120,000 in the first year, $180,000 in the second year, $240,000 in the third year.If Designs uses 11 percent as its discount rate, what is the present value of the cash flows?

Accepted Answer

A) $429,720 
B) $457,620 
C) $456,000 
D) $424,820 
A) $429,720 
B) $457,620 
C) $456,000 
D) $424,820

Question 13

is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

Accepted Answer

A) basic interest 
B) simple interest 
C) future interest 
D) compound interest 
A) basic interest 
B) simple interest 
C) future interest 
D) compound interest

The payment or receipt of a series of equal cash flows per period, at the end of each period, for a specified amount of time is called a(n):

An annuity that begins more than 1 year in the future is referred to as a(n) .

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

Seebee makes quarterly (end of period) payments of $30,000 into a pension fund earning 12 percent per year compounded quarterly for 10 years.How much interest will they have earned in 10 years?

Inco purchased a computer for $200,000 and this machine is expected to generate annual cash flows of $48,271 over the next 5 years.What is the expected rate of return on this investment?

Determine how much you would be willing to pay for a bond that pays $60 annual interest indefinitely and never matures (i.e., a perpetuity), assuming you require an 8 percent rate of return on this investment.

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

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

A(n) is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e.forever).

You have just won a $50,000 bond that pays no interest and matures in 20 years.If the discount rate is 10%, what is the present value of your bond?

Annuity due calculations are most common when dealing with:

is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

A: The Time Value of Money

Fixed-Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

A: Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital, Capital Structure, and Dividend Policy

Capital Structure Concepts

Capital Structure Management in Practice

A: Capital Structure Management in Practice

Dividend Policy

Working Capital Management

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate-Term Financing

Financing with Derivatives

A: Financing with Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Filters

Exam 5: The Time Value of Money

The payment or receipt of a series of equal cash flows per period, at the end of each period, for a specified amount of time is called a(n):

An annuity that begins more than 1 year in the future is referred to as a(n) .

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

Seebee makes quarterly (end of period) payments of $30,000 into a pension fund earning 12 percent per year compounded quarterly for 10 years.How much interest will they have earned in 10 years?

Inco purchased a computer for $200,000 and this machine is expected to generate annual cash flows of $48,271 over the next 5 years.What is the expected rate of return on this investment?

Determine how much you would be willing to pay for a bond that pays $60 annual interest indefinitely and never matures (i.e., a perpetuity), assuming you require an 8 percent rate of return on this investment.

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

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

A(n) is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e.forever).

You have just won a $50,000 bond that pays no interest and matures in 20 years.If the discount rate is 10%, what is the present value of your bond?

Annuity due calculations are most common when dealing with:

is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

A: The Time Value of Money

Fixed-Income Securities: Characteristics and Valuation

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

A: Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital, Capital Structure, and Dividend Policy

Capital Structure Concepts

Capital Structure Management in Practice

A: Capital Structure Management in Practice

Dividend Policy

Working Capital Management

The Management of Cash and Marketable Securities

The Management of Accounts Receivable and Inventories

Lease and Intermediate-Term Financing

Financing with Derivatives

A: Financing with Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Filters