Question 1

At 11 percent interest, how long would it take to quadruple your money?

Accepted Answer

A) 6.55 years 
B) 6.64 years 
C) 13.09 years 
D) 13.28 years 
E) 13.56 years 
A) 6.55 years 
B) 6.64 years 
C) 13.09 years 
D) 13.28 years 
E) 13.56 years

Question 2

According to the Rule of 72, you can do which one of the following?

Accepted Answer

A) double your money in five years at 7.2 percent interest 
B) double your money in 7.2 years at 8 percent interest 
C) double your money in 8 years at 9 percent interest 
D) triple your money in 7.2 years at 5 percent interest 
E) triple your money at 10 percent interest in 7.2 years 
A) double your money in five years at 7.2 percent interest 
B) double your money in 7.2 years at 8 percent interest 
C) double your money in 8 years at 9 percent interest 
D) triple your money in 7.2 years at 5 percent interest 
E) triple your money at 10 percent interest in 7.2 years

Question 3

Fifteen years ago, Jackson Supply set aside $130,000 in case of a financial emergency. Today, that account has increased in value to $330,592. What rate of interest is the firm earning on this money?

Accepted Answer

A) 5.80 percent 
B) 6.42 percent 
C) 6.75 percent 
D) 7.28 percent 
E) 7.53 percent 
A) 5.80 percent 
B) 6.42 percent 
C) 6.75 percent 
D) 7.28 percent 
E) 7.53 percent

Question 4

A year ago, you deposited $30,000 into a retirement savings account at a fixed rate of 5.5 percent. Today, you could earn a fixed rate of 6.5 percent on a similar type account. However, your rate is fixed and cannot be adjusted. How much less could you have deposited last year if you could have earned a fixed rate of 6.5 percent and still have the same amount as you currently will when you retire 38 years from today?

Accepted Answer

A) $2,118.42 less 
B) $3,333.33 less 
C) $5,417.09 less 
D) $7,274.12 less 
E) $9,234.97 less 
A) $2,118.42 less 
B) $3,333.33 less 
C) $5,417.09 less 
D) $7,274.12 less 
E) $9,234.97 less

Question 5

This morning, TL Trucking invested $80,000 to help fund a company expansion project planned for 4 years from now. How much additional money will the firm have 4 years from now if it can earn 5 percent rather than 4 percent on its savings?

Accepted Answer

A) $2,940.09 
B) $3,651.82 
C) $4,008.17 
D) $4,219.68 
E) $4,711.08 
A) $2,940.09 
B) $3,651.82 
C) $4,008.17 
D) $4,219.68 
E) $4,711.08

Question 6

You just received a $5,000 gift from your grandmother. You have decided to save this money so that you can gift it to your grandchildren 50 years from now. How much additional money will you have to gift to your grandchildren if you can earn an average of 8.5 percent instead of just 8 percent on your savings?

Accepted Answer

A) $47,318.09 
B) $52,464.79 
C) $55,211.16 
D) $58,811.99 
E) $60,923.52 
A) $47,318.09 
B) $52,464.79 
C) $55,211.16 
D) $58,811.99 
E) $60,923.52

Question 7

Interest earned on both the initial principal and the interest reinvested from prior periods is called:

Accepted Answer

A) free interest. 
B) dual interest. 
C) simple interest. 
D) interest on interest. 
E) compound interest. 
A) free interest. 
B) dual interest. 
C) simple interest. 
D) interest on interest. 
E) compound interest.

Question 8

At an interest rate of 10 percent and using the Rule of 72, how long will it take to double the value of a lump sum invested today?
 How long will it take after that until the account grows to four times the initial investment?
 Given the power of compounding, shouldn't it take less time for the money to double the second time?

Accepted Answer

It will take 7.2 years to double the ini

At 11 percent interest, how long would it take to quadruple your money?

According to the Rule of 72, you can do which one of the following?

Fifteen years ago, Jackson Supply set aside $130,000 in case of a financial emergency. Today, that account has increased in value to $330,592. What rate of interest is the firm earning on this money?

This morning, TL Trucking invested $80,000 to help fund a company expansion project planned for 4 years from now. How much additional money will the firm have 4 years from now if it can earn 5 percent rather than 4 percent on its savings?

Interest earned on both the initial principal and the interest reinvested from prior periods is called:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Risk Management: An Introduction to Financial Engineering

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters

Exam 5: Introduction to Valuation: The Time Value of Money

At 11 percent interest, how long would it take to quadruple your money?

According to the Rule of 72, you can do which one of the following?

Fifteen years ago, Jackson Supply set aside $130,000 in case of a financial emergency. Today, that account has increased in value to $330,592. What rate of interest is the firm earning on this money?

This morning, TL Trucking invested $80,000 to help fund a company expansion project planned for 4 years from now. How much additional money will the firm have 4 years from now if it can earn 5 percent rather than 4 percent on its savings?

Interest earned on both the initial principal and the interest reinvested from prior periods is called:

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Discounted Cash Flow Valuation

Interest Rates and Bond Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Dividend Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Risk Management: An Introduction to Financial Engineering

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters