Exam 5: The Time Value of Money

A furniture store is offering free credit on purchases over $1,000.You observe that a big-screen television can be purchased for nothing down and $4,000 due in one year.The store next door offers an identical television for $3,650 but does not offer credit terms.Which statement below best describes the cost of the "free" credit?

(Multiple Choice)

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Question 21

What is the discount factor for $1 to be received in 5 years at a discount rate of 8%?

(Multiple Choice)

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Question 22

Three thousand dollars is deposited into an account paying 10% annually to provide three annual withdrawals of $1,206.34 beginning in one year.How much remains in the account after the second payment has been withdrawn?

(Multiple Choice)

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Question 23

How much interest is earned in just the third year on a $1,000 deposit that earns 7% interest compounded annually?

(Multiple Choice)

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Question 24

The more frequent the compounding,the higher the future value,other things equal.

(True/False)

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Question 25

Would a depositor prefer an APR of 8% with monthly compounding or an APR of 8.5% with semiannual compounding?

(Multiple Choice)

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Question 26

Comparing the values of undiscounted cash flows is analogous to comparing apples to oranges.

(True/False)

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Question 27

The present value of an annuity due equals the present value of an ordinary annuity times the discount rate.

(True/False)

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Question 28

What will be the approximate population of the Canada,if its current population of 35 million grows at a compound rate of 2% annually for 25 years?

(Multiple Choice)

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Question 29

To calculate present value,we discount the future value by some interest rate r,the discount rate.

(True/False)

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Question 30

When money is invested at compound interest,the growth rate is the interest rate.

(True/False)

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Question 31

Your car loan requires payments of $200 per month for the first year and payments of $400 per month during the second year.The annual interest rate is 12% and payments begin in one month.What is the present value of this 2-year loan?

(Multiple Choice)

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Question 32

You invested $1,200 three years ago.During the three years,you earned annual rates of return of 4.8%,9.2%,and 11.6%.What is the value of this investment today?

(Multiple Choice)

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Question 33

The present value of a perpetuity can be determined by:

(Multiple Choice)

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Question 34

The term "constant dollars" refers to equal payments for amortizing a loan.

(True/False)

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Question 35

What is the present value of your trust fund if you have projected that it will provide you with $50,000 on your 30^th birthday (7 years from today)and it earns 10% compounded annually?

(Multiple Choice)

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Question 36

Assume you are making $989 monthly payments on your amortized mortgage.The amount of each payment that is applied to the principal balance:

(Multiple Choice)

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Question 37

What is the annually compounded rate of interest on an account with an APR of 10% and monthly compounding?

(Multiple Choice)

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Question 38

After reading the fine print in your credit card agreement,you find that the "low" interest rate is actually an 18% APR,or 1.5% per month.What is the effective annual rate?

(Multiple Choice)

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Question 39

A car dealer offers payments of $522.59 per month for 48 months on a $25,000 car after making a $4,000 down payment.What is the loan's APR?

(Multiple Choice)

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Question 40

Showing 21 - 40 of 110

Exam 5: The Time Value of Money

What is the discount factor for $1 to be received in 5 years at a discount rate of 8%?

Three thousand dollars is deposited into an account paying 10% annually to provide three annual withdrawals of $1,206.34 beginning in one year.How much remains in the account after the second payment has been withdrawn?

How much interest is earned in just the third year on a $1,000 deposit that earns 7% interest compounded annually?

The more frequent the compounding,the higher the future value,other things equal.

Would a depositor prefer an APR of 8% with monthly compounding or an APR of 8.5% with semiannual compounding?

Comparing the values of undiscounted cash flows is analogous to comparing apples to oranges.

The present value of an annuity due equals the present value of an ordinary annuity times the discount rate.

What will be the approximate population of the Canada,if its current population of 35 million grows at a compound rate of 2% annually for 25 years?

To calculate present value,we discount the future value by some interest rate r,the discount rate.

When money is invested at compound interest,the growth rate is the interest rate.

Your car loan requires payments of $200 per month for the first year and payments of $400 per month during the second year.The annual interest rate is 12% and payments begin in one month.What is the present value of this 2-year loan?

You invested $1,200 three years ago.During the three years,you earned annual rates of return of 4.8%,9.2%,and 11.6%.What is the value of this investment today?

The present value of a perpetuity can be determined by:

The term "constant dollars" refers to equal payments for amortizing a loan.

What is the present value of your trust fund if you have projected that it will provide you with $50,000 on your 30th birthday (7 years from today)and it earns 10% compounded annually?

Assume you are making $989 monthly payments on your amortized mortgage.The amount of each payment that is applied to the principal balance:

What is the annually compounded rate of interest on an account with an APR of 10% and monthly compounding?

After reading the fine print in your credit card agreement,you find that the "low" interest rate is actually an 18% APR,or 1.5% per month.What is the effective annual rate?

A car dealer offers payments of $522.59 per month for 48 months on a $25,000 car after making a $4,000 down payment.What is the loan's APR?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, IPOs, and Seasoned Offerings

Debt and Payout Policy

Leasing

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Cash and Inventory Management

Credit Management and Collection

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Filters

What is the present value of your trust fund if you have projected that it will provide you with $50,000 on your 30^th birthday (7 years from today)and it earns 10% compounded annually?