Question 1

An annuity due must have a present value at least as large as an equivalent ordinary annuity.

Accepted Answer

A) True 
 B)False

Question 2

How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in purchasing a car one year from now,assuming that the car's current price is $20,000,and inflation will be 4%?

Accepted Answer

A)  $3,774.61 
B)  $3,782.20 
C)  $3,924.53 
D)  $4,080.08 
A)  $3,774.61 
B)  $3,782.20 
C)  $3,924.53 
D)  $4,080.08

Question 3

A perpetuity of $5,000 per year beginning today is said to offer a 15% interest rate.What is its present value?

Accepted Answer

A)  $33,333.33 
B)  $37,681.16 
C)  $38,333.33 
D)  $65,217.39 
A)  $33,333.33 
B)  $37,681.16 
C)  $38,333.33 
D)  $65,217.39

Question 4

How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest?

Accepted Answer

A)  $88 
B)  $100 
C)  $112 
D)  $200 
A)  $88 
B)  $100 
C)  $112 
D)  $200

Question 5

A credit card account that charges interest at the rate of 1.25% per month would have an annually compounded rate of _____ and an APR of ____.

Accepted Answer

A)  16.08%; 15.00% 
B)  14.55%; 16.08% 
C)  12.68%; 15.00% 
D)  15.00%; 14.55% 
A)  16.08%; 15.00% 
B)  14.55%; 16.08% 
C)  12.68%; 15.00% 
D)  15.00%; 14.55%

Question 6

Lester's just signed a contract that will provide the firm with annual cash inflows of $28,000,$35,000,and $42,000 over the next three years with the first payment of $28,000 occurring one year from today.What is this contract worth today at a discount rate of 7.25%?

Accepted Answer

A)  $88,311.08 
B)  $89,423.91 
C)  $90,580.55 
D)  $91,341.41 
A)  $88,311.08 
B)  $89,423.91 
C)  $90,580.55 
D)  $91,341.41

Question 7

Would you prefer a savings account that paid 7% interest compounded quarterly,6.8% compounded monthly,7.2% compounded weekly,or an account that paid 7.5% with annual compounding?

Accepted Answer

A)  7% compounded quarterly 
B)  6.8% compounded monthly 
C)  7.2% compounded weekly 
D)  7.5% compounded annually 
A)  7% compounded quarterly 
B)  6.8% compounded monthly 
C)  7.2% compounded weekly 
D)  7.5% compounded annually

Question 8

What is the effective annual interest rate on a 9% APR automobile loan that has monthly payments?

Accepted Answer

A)  9.00% 
B)  9.38% 
C)  9.81% 
D)  10.94% 
A)  9.00% 
B)  9.38% 
C)  9.81% 
D)  10.94%

Question 9

$50,000 is borrowed,to be repaid in three equal,annual payments with 10% interest.Approximately how much principal is amortized with the first payment?

Accepted Answer

A)  $2,010.60 
B)  $5,000.00 
C)  $15,105.74 
D)  $20,105.74 
A)  $2,010.60 
B)  $5,000.00 
C)  $15,105.74 
D)  $20,105.74

Question 10

Converting an annuity to an annuity due decreases the present value.

Accepted Answer

A) True 
 B)False

An annuity due must have a present value at least as large as an equivalent ordinary annuity.

How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in purchasing a car one year from now,assuming that the car's current price is $20,000,and inflation will be 4%?

A perpetuity of $5,000 per year beginning today is said to offer a 15% interest rate.What is its present value?

How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest?

A credit card account that charges interest at the rate of 1.25% per month would have an annually compounded rate of _ and an APR of .

Lester's just signed a contract that will provide the firm with annual cash inflows of $28,000,$35,000,and $42,000 over the next three years with the first payment of $28,000 occurring one year from today.What is this contract worth today at a discount rate of 7.25%?

Would you prefer a savings account that paid 7% interest compounded quarterly,6.8% compounded monthly,7.2% compounded weekly,or an account that paid 7.5% with annual compounding?

What is the effective annual interest rate on a 9% APR automobile loan that has monthly payments?

$50,000 is borrowed,to be repaid in three equal,annual payments with 10% interest.Approximately how much principal is amortized with the first payment?

Converting an annuity to an annuity due decreases the present value.

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

Exam 5: The Time Value of Money

An annuity due must have a present value at least as large as an equivalent ordinary annuity.

How much must be deposited today in an account earning 6% annually to accumulate a 20% down payment to use in purchasing a car one year from now,assuming that the car's current price is $20,000,and inflation will be 4%?

A perpetuity of $5,000 per year beginning today is said to offer a 15% interest rate.What is its present value?

How much interest will be earned in the next year on an investment paying 12% compounded annually if $100 was just credited to the account for interest?

A credit card account that charges interest at the rate of 1.25% per month would have an annually compounded rate of _____ and an APR of ____.

Lester's just signed a contract that will provide the firm with annual cash inflows of $28,000,$35,000,and $42,000 over the next three years with the first payment of $28,000 occurring one year from today.What is this contract worth today at a discount rate of 7.25%?

Would you prefer a savings account that paid 7% interest compounded quarterly,6.8% compounded monthly,7.2% compounded weekly,or an account that paid 7.5% with annual compounding?

What is the effective annual interest rate on a 9% APR automobile loan that has monthly payments?

$50,000 is borrowed,to be repaid in three equal,annual payments with 10% interest.Approximately how much principal is amortized with the first payment?

Converting an annuity to an annuity due decreases the present value.

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

A credit card account that charges interest at the rate of 1.25% per month would have an annually compounded rate of _ and an APR of .