Question 1

The time value of money can be used to estimate future savings with periodic drawing of funds.

Accepted Answer

A) True 
 B)False  True

Question 2

You wish to retire in 30 years and determine that you will need $1,000,000 to fund your retirement.If you can invest with a return of 8% you will need to invest ________ each year to reach your goal.

Accepted Answer

$8,827 (rounded)

Question 3

An annuity is a stream of equal payments that are received or paid at equal intervals in time.

Accepted Answer

A) True 
 B)False  True

Question 4

The time value of money concept can help you determine how much money you need to save over a period of time to achieve a specific goal.

Accepted Answer

A) True 
 B)False

Question 5

The time value of money refers to

Accepted Answer

A) personal opportunity costs such as time lost on an activity. 
B) financial decisions that require borrowing funds from a bank. 
C) changes in interest rates due to changes in the supply and demand for money in the national economy. 
D) the difference in values of money as to when it is received. 
A) personal opportunity costs such as time lost on an activity. 
B) financial decisions that require borrowing funds from a bank. 
C) changes in interest rates due to changes in the supply and demand for money in the national economy. 
D) the difference in values of money as to when it is received.

Question 6

The time value of money can be applied to all of the following except

Accepted Answer

A) bond valuation. 
B) stock valuation. 
C) current market value of your home. 
D) investment valuation. 
A) bond valuation. 
B) stock valuation. 
C) current market value of your home. 
D) investment valuation.

Question 7

The concept of time value of money is based on

Accepted Answer

A) inflation. 
B) taxes. 
C) interest earned. 
D) the Dow Jones Industrial Average. 
A) inflation. 
B) taxes. 
C) interest earned. 
D) the Dow Jones Industrial Average.

Question 8

Present and future values concepts are applied to which of the following decisions except

Accepted Answer

A) purchase of a home. 
B) calculation of withdrawals needed during retirement. 
C) calculation of savings for a large purchase. 
D) annual cash inflows. 
A) purchase of a home. 
B) calculation of withdrawals needed during retirement. 
C) calculation of savings for a large purchase. 
D) annual cash inflows.

Question 9

Aaron wants to put $200 per month into an IRA account at 15 percent for four years.What is he solving for using his financial calculator?

Accepted Answer

A) Present value 
B) Future value 
C) Interest rate 
D) Payment 
A) Present value 
B) Future value 
C) Interest rate 
D) Payment

Question 10

When money accumulates interest,it is said to be discounting.

Accepted Answer

A) True 
 B)False

Question 11

To determine how much you must save each year to have enough for your daughter's college education,you would use the present value of $1 tables.

Accepted Answer

A) True 
 B)False

Question 12

If Joe has $5,600 today and invests it at a 10 percent interest rate,how much will he have in 12 years? (Note-Solve as a Future Value problem.)
(a)$17,393.60
(b)$17,572.80
(c)$15,770.49
(d)$12,320.00

Accepted Answer

Note-This problem can be solve

Question 13

Compounding is the process of obtaining present values; discounting is the process of obtaining future values.

Accepted Answer

A) True 
 B)False

Question 14

To determine how much money you would need to save to withdraw $10,000 a year for five years,you would use the present value of an annuity tables.

Accepted Answer

A) True 
 B)False

Question 15

Sandy wants to know how much she needs to save today to have $5,000 in five years at a 7 percent interest rate.Which of the following tables should she use?

Accepted Answer

A) Present value $1 
B) Present value ordinary annuity 
C) Future value $1 
D) Future value ordinary annuity 
A) Present value $1 
B) Present value ordinary annuity 
C) Future value $1 
D) Future value ordinary annuity

Question 16

If Sandy has $7,000 today and invests it for five years at a 5 percent interest rate,how much will she have in five years?

Accepted Answer

A) $8,750 
B) $7,850 
C) $8,932 
D) $8,857 
A) $8,750 
B) $7,850 
C) $8,932 
D) $8,857

Question 17

The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________.

Accepted Answer

The answer of The concept that a dollar received today...

Question 18

The present value of an annuity can be obtained by discounting the individual cash flows of the annuity and then summing the resulting present values.

Accepted Answer

A) True 
 B)False

Question 19

The process of obtaining present values is also called compounding.

Accepted Answer

A) True 
 B)False

Question 20

An annuity due differs from an ordinary annuity in that the payments occur at the beginning instead of the end of the period.

Accepted Answer

A) True 
 B)False

Exam 3: Applying Time Value Concepts

The time value of money can be used to estimate future savings with periodic drawing of funds.

You wish to retire in 30 years and determine that you will need $1,000,000 to fund your retirement.If you can invest with a return of 8% you will need to invest ________ each year to reach your goal.

An annuity is a stream of equal payments that are received or paid at equal intervals in time.

The time value of money concept can help you determine how much money you need to save over a period of time to achieve a specific goal.

The time value of money refers to

The time value of money can be applied to all of the following except

The concept of time value of money is based on

Present and future values concepts are applied to which of the following decisions except

Aaron wants to put $200 per month into an IRA account at 15 percent for four years.What is he solving for using his financial calculator?

When money accumulates interest,it is said to be discounting.

To determine how much you must save each year to have enough for your daughter's college education,you would use the present value of $1 tables.

If Joe has $5,600 today and invests it at a 10 percent interest rate,how much will he have in 12 years? (Note-Solve as a Future Value problem.) (a)$17,393.60 (b)$17,572.80 (c)$15,770.49 (d)$12,320.00

Compounding is the process of obtaining present values; discounting is the process of obtaining future values.

To determine how much money you would need to save to withdraw $10,000 a year for five years,you would use the present value of an annuity tables.

Sandy wants to know how much she needs to save today to have $5,000 in five years at a 7 percent interest rate.Which of the following tables should she use?

If Sandy has $7,000 today and invests it for five years at a 5 percent interest rate,how much will she have in five years?

The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________.

The present value of an annuity can be obtained by discounting the individual cash flows of the annuity and then summing the resulting present values.

The process of obtaining present values is also called compounding.

An annuity due differs from an ordinary annuity in that the payments occur at the beginning instead of the end of the period.

Overview of a Financial Plan

Planning With Personal Financial Statements

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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