Question 1

Any sequence of equally spaced,level cash flows is called an annuity.An annuity is also known as a perpetuity.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Given the future value,which of the following will contribute to a lower present value?

Accepted Answer

A)  Higher discount rate 
B)  Fewer time periods 
C)  Less frequent discounting 
D)  Lower discount factor 
A)  Higher discount rate 
B)  Fewer time periods 
C)  Less frequent discounting 
D)  Lower discount factor

Question 4

If a borrower promises to pay you $1,900 nine years from now in return for a loan of $1,000 today,what effective annual interest rate is being offered if interest is compounded annually?

Accepted Answer

A)  5.26% 
B)  7.39% 
C)  9.00% 
D)  10.00% 
A)  5.26% 
B)  7.39% 
C)  9.00% 
D)  10.00%

Question 5

Other things being equal,the more frequent the compounding period,the:

Accepted Answer

A)  higher the annual percentage rate. 
B)  lower the annual percentage rate. 
C)  higher the effective annual interest rate. 
D)  lower the effective annual interest rate. 
A)  higher the annual percentage rate. 
B)  lower the annual percentage rate. 
C)  higher the effective annual interest rate. 
D)  lower the effective annual interest rate.

Question 6

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 7

How much must be saved at the end of each year for the next 10 years in order to accumulate $50,000,if you can earn 9% annually? Assume you contribute the same amount to your savings every year.

Accepted Answer

A)  $3,291.00 
B)  $3,587.87 
C)  $4,500.33 
D)  $4,587.79 
A)  $3,291.00 
B)  $3,587.87 
C)  $4,500.33 
D)  $4,587.79

Question 8

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

Accepted Answer

A)  $70.00 
B)  $80.14 
C)  $105.62 
D)  $140.00 
A)  $70.00 
B)  $80.14 
C)  $105.62 
D)  $140.00

Question 9

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?

Accepted Answer

A)  $1,498.08 
B)  $1,512.11 
C)  $1,532.60 
D)  $1,549.19 
A)  $1,498.08 
B)  $1,512.11 
C)  $1,532.60 
D)  $1,549.19

Question 10

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

Accepted Answer

A)  $25,000.00 
B)  $25,657.91 
C)  $28,223.70 
D)  $29,411.76 
A)  $25,000.00 
B)  $25,657.91 
C)  $28,223.70 
D)  $29,411.76

Question 11

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

Accepted Answer

A) True 
 B)False

Any sequence of equally spaced,level cash flows is called an annuity.An annuity is also known as a perpetuity.

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?

Given the future value,which of the following will contribute to a lower present value?

If a borrower promises to pay you $1,900 nine years from now in return for a loan of $1,000 today,what effective annual interest rate is being offered if interest is compounded annually?

Other things being equal,the more frequent the compounding period,the:

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?

How much must be saved at the end of each year for the next 10 years in order to accumulate $50,000,if you can earn 9% annually? Assume you contribute the same amount to your savings every year.

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

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?

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

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

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 Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers,Acquisitions,and Corporate Control

International Financial Management

Options

Risk Management

Filters

Exam 5: The Time Value of Money

Any sequence of equally spaced,level cash flows is called an annuity.An annuity is also known as a perpetuity.

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?

Given the future value,which of the following will contribute to a lower present value?

If a borrower promises to pay you $1,900 nine years from now in return for a loan of $1,000 today,what effective annual interest rate is being offered if interest is compounded annually?

Other things being equal,the more frequent the compounding period,the:

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?

How much must be saved at the end of each year for the next 10 years in order to accumulate $50,000,if you can earn 9% annually? Assume you contribute the same amount to your savings every year.

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

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?

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

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

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 Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers,Acquisitions,and Corporate Control

International Financial Management

Options

Risk Management

Filters