Question 1

What annual rate of return is earned on a $13,000 investment made in year 2 when it grows to $17,000 by the end of year 7?

Accepted Answer

A) 10.64 percent 
B)  4.28 percent 
C) 8.04 percent 
D)  5.51 percent 
A) 10.64 percent 
B)  4.28 percent 
C) 8.04 percent 
D)  5.51 percent

Question 2

Consider a $2,000 deposit earning 6 percent interest per year for five years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

Accepted Answer

A)  $60.00 
B)  $76.45 
C)  $600.00 
D)  $676.45 
A)  $60.00 
B)  $76.45 
C)  $600.00 
D)  $676.45

Question 3

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

Accepted Answer

A)  +25 percent, −20 percent, respectively 
B)  −25 percent, +20 percent, respectively 
C)  125 percent, −25 percent, respectively 
D)  125 percent, −20 percent, respectively 
A)  +25 percent, −20 percent, respectively 
B)  −25 percent, +20 percent, respectively 
C)  125 percent, −25 percent, respectively 
D)  125 percent, −20 percent, respectively

Question 4

Which of the following investments would you prefer?

Accepted Answer

A)  an investment earning 6 percent for 10 years 
B)  an investment earning 5 percent for 20 years 
C)  an investment earning 4 percent for 30 years 
D)  an investment earning 3 percent for 40 years 
A)  an investment earning 6 percent for 10 years 
B)  an investment earning 5 percent for 20 years 
C)  an investment earning 4 percent for 30 years 
D)  an investment earning 3 percent for 40 years

Question 5

Which of the following will not increase a present value?

Accepted Answer

A)  increase the interest rate 
B)  decrease the number of periods 
C)  increase the future value 
A)  increase the interest rate 
B)  decrease the number of periods 
C)  increase the future value

Question 6

Approximately what interest rate is needed to double an investment over four years?

Accepted Answer

A)  4 percent 
B)  18 percent 
C)  25 percent 
D)  100 percent 
A)  4 percent 
B)  18 percent 
C)  25 percent 
D)  100 percent

Question 7

Ten years ago, Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now). James can make a 20-year investment today and lock in a 6 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Accepted Answer

A)  $673.75 
B)  $1,206.59 
C)  $1,967.15 
D)  $2,373.54 
A)  $673.75 
B)  $1,206.59 
C)  $1,967.15 
D)  $2,373.54

Question 8

Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?

Accepted Answer

A)  $3.94 
B)  $24.00 
C)  $48.00 
D)  $51.94 
A)  $3.94 
B)  $24.00 
C)  $48.00 
D)  $51.94

Question 9

Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now). James can make a 20-year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Accepted Answer

A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64 
A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64

Question 10

What annual rate of return is earned on an $895 investment that grows to $1,976 in eight years?

Accepted Answer

A)  9.14 percent 
B)  9.97 percent 
C)  10.41 percent 
D)  11.73 percent 
A)  9.14 percent 
B)  9.97 percent 
C)  10.41 percent 
D)  11.73 percent

Question 11

When calculating the number of years needed to grow an investment to a specific amount of money

Accepted Answer

A)  the lower the interest rate, the shorter the time period needed to achieve the growth. 
B)  the higher the interest rate, the shorter the time period needed to achieve the growth. 
C)  the interest rate has nothing to do with the length of the time period needed to achieve the growth. 
D)  the Rule of 72 is the only way to calculate the time period needed to achieve the growth. 
A)  the lower the interest rate, the shorter the time period needed to achieve the growth. 
B)  the higher the interest rate, the shorter the time period needed to achieve the growth. 
C)  the interest rate has nothing to do with the length of the time period needed to achieve the growth. 
D)  the Rule of 72 is the only way to calculate the time period needed to achieve the growth.

Question 12

Which of the following is the equivalent of $300 received today?

Accepted Answer

A)  Seven hundred ninety-five dollars ninety-nine cents to be received 20 years in the future assuming a 5 percent annual interest rate. 
B)  Hundred dollars to be received two years from now and $200 three years from now. 
C)  Three hundred dollars compounded at 10 percent for one year. 
D)  All of these choices are correct. 
A)  Seven hundred ninety-five dollars ninety-nine cents to be received 20 years in the future assuming a 5 percent annual interest rate. 
B)  Hundred dollars to be received two years from now and $200 three years from now. 
C)  Three hundred dollars compounded at 10 percent for one year. 
D)  All of these choices are correct.

Question 13

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

Accepted Answer

A)  43.09 percent 
B) 55.78 percent 
C)  76.47 percent 
D)  81.03 percent 
A)  43.09 percent 
B) 55.78 percent 
C)  76.47 percent 
D)  81.03 percent

Question 14

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

Accepted Answer

A)  At age 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 percent. 
C)  Both yield the same amount at age 60. 
D)  There is not enough information to determine which case earns the most money at age 60. 
A)  At age 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 percent. 
C)  Both yield the same amount at age 60. 
D)  There is not enough information to determine which case earns the most money at age 60.

Question 15

You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

Accepted Answer

A)  $2,501.42 
B) $2,693.71 
C)  $2,713.04 
D)  $2,620.68 
A)  $2,501.42 
B) $2,693.71 
C)  $2,713.04 
D)  $2,620.68

Question 16

Which of the following would you prefer?

Accepted Answer

A)  five hundred dollars to be received in 10 years when rates are 8 percent 
B)  three hundred dollars today 
C)  six hundred dollars to be received in 12 years when rates are 8 percent 
D)  seven hundred dollars to be received in 12 years when rates are 7 percent 
A)  five hundred dollars to be received in 10 years when rates are 8 percent 
B)  three hundred dollars today 
C)  six hundred dollars to be received in 12 years when rates are 8 percent 
D)  seven hundred dollars to be received in 12 years when rates are 7 percent

Question 17

You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?

Accepted Answer

A)  $1215.07 
B)  $1215.51 
C)  $1275.81 
D)  $1285.75 
A)  $1215.07 
B)  $1215.51 
C)  $1275.81 
D)  $1285.75

Question 18

How long will it take $100 to reach $500 when it grows at 10 percent per year?

Accepted Answer

A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years 
A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years

Question 19

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4, and increase to 6 percent in the remaining years?

Accepted Answer

A)  $1,215.51 
B)  $1,238.77 
C)  $2,970.03 
D)  $2,982.74 
A)  $1,215.51 
B)  $1,238.77 
C)  $2,970.03 
D)  $2,982.74

Question 20

An average home in Chicago costs $295,000. If house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in five years?

Accepted Answer

A)  $328,995.61 
B)  $338,941.27 
C)  $341,985.85 
D)  $347,028.19 
A)  $328,995.61 
B)  $338,941.27 
C)  $341,985.85 
D)  $347,028.19

What annual rate of return is earned on a $13,000 investment made in year 2 when it grows to $17,000 by the end of year 7?

Consider a $2,000 deposit earning 6 percent interest per year for five years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

Which of the following investments would you prefer?

Which of the following will not increase a present value?

Approximately what interest rate is needed to double an investment over four years?

Ten years ago, Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now). James can make a 20-year investment today and lock in a 6 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?

What annual rate of return is earned on an $895 investment that grows to $1,976 in eight years?

When calculating the number of years needed to grow an investment to a specific amount of money

Which of the following is the equivalent of $300 received today?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

Which of the following would you prefer?

You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?

How long will it take $100 to reach $500 when it grows at 10 percent per year?

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4, and increase to 6 percent in the remaining years?

An average home in Chicago costs $295,000. If house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in five years?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

What annual rate of return is earned on a $13,000 investment made in year 2 when it grows to $17,000 by the end of year 7?

Consider a $2,000 deposit earning 6 percent interest per year for five years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

You invested $1,000 in the stock market one year ago. Today, the investment is valued at $1,250. What return did you earn? What return would you suffer next year for your investment to be valued at the original $1,000?

Which of the following investments would you prefer?

Which of the following will not increase a present value?

Approximately what interest rate is needed to double an investment over four years?

Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?

What annual rate of return is earned on an $895 investment that grows to $1,976 in eight years?

When calculating the number of years needed to grow an investment to a specific amount of money

Which of the following is the equivalent of $300 received today?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

At age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

Which of the following would you prefer?

You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?

How long will it take $100 to reach $500 when it grows at 10 percent per year?

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4, and increase to 6 percent in the remaining years?

An average home in Chicago costs $295,000. If house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in five years?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters