Question 1

In actual practice, most corporate bonds pay interest four times a year.
Not in chapter

Accepted Answer

A) True 
 B)False

Question 2

If the interest rate is 0% for 10 years, then the present value will be less than the future value.

Accepted Answer

A) True 
 B)False

Question 3

The present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent, is

Accepted Answer

A) $2,500. 
B) $3,043. 
C) $6,516. 
D) $2,856. 
A) $2,500. 
B) $3,043. 
C) $6,516. 
D) $2,856.

Question 4

Carly Fiorina owns stock in a company which has consistently paid a growing dividend over the last five years.The first year Carly owned the stock, she received $1.71 per share and in the fifth year, she received $2.89 per share.What is the growth rate of the dividends over the last five yearsduring this time? 4 years difference-not five.Answer remains "B".

Accepted Answer

A) 7 percent 
B) 14 percent 
C) 12 percent 
D) 5 percent 
A) 7 percent 
B) 14 percent 
C) 12 percent 
D) 5 percent

Question 5

The annual percentage rate is the true opportunity cost measure of the interest rate.

Accepted Answer

A) True 
 B)False

Question 6

The basic future and present value equations contain four variables.Which one of the following is not included?

Accepted Answer

A) present value (PV) 
B) future value (FV) 
C) interest rate (r) 
D) inflation rate (I) 
E) number of periods (n) 
A) present value (PV) 
B) future value (FV) 
C) interest rate (r) 
D) inflation rate (I) 
E) number of periods (n)

Question 7

The present value of an annuity of $5,000 to be received at the end of each of the nextevery six months for over 6 years at a 4% annual rate would be:

Accepted Answer

A) $26,210 
B) $52,875 
C) $3,950 
D) none of the above 
A) $26,210 
B) $52,875 
C) $3,950 
D) none of the above

Question 8

Barach ObamaBarbara borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual installments.The actual end-of-year payment is

Accepted Answer

A) $942 
B) $1,125 
C) $1,482 
D) $2,641 
A) $942 
B) $1,125 
C) $1,482 
D) $2,641

Question 9

An annuity due may also be referred to as a deferred annuity.

Accepted Answer

A) True 
 B)False

Question 10

What is the highest effective rate attainable with a 12 percent nominal rate?

Accepted Answer

A) 12.00% 
B) 12.55% 
C) 12.75% 
D) 12.95% 
A) 12.00% 
B) 12.55% 
C) 12.75% 
D) 12.95%

Question 11

The future value of $2,000 invested today at 6% in 3 years would result in a future value of:

Accepted Answer

A) $2,000 
B) $2,382 
C) $6,362 
D) none of the above 
A) $2,000 
B) $2,382 
C) $6,362 
D) none of the above

Question 12

The values of stocks and bonds are not affected by time value of money concepts.

Accepted Answer

A) True 
 B)False

Question 13

Assume JP Morgan has a choice between two deposit accounts.Account A has an annual percentage rate of 7.55 percent but with interest compounded monthly.Account B has an annual percentage rate of 7.45 percent with interest compounded continuouslyquarterly.Which account provides the highest effective annual return?

Accepted Answer

A) Account A 
B) Account B 
C) Both provide the same effective annual return. 
D) We don't have sufficient information to make a choice. 
A) Account A 
B) Account B 
C) Both provide the same effective annual return. 
D) We don't have sufficient information to make a choice.

Question 14

If we will receive $100 per year beginning one year from now for a period of three years with a 12% discount rate, what would be the value of our investment today?

Accepted Answer

A) $230 
B) $240 
C) $250 
D) $260 
A) $230 
B) $240 
C) $250 
D) $260

Question 15

For a given discount rate, an ordinary annuity and an annuity due have the same present value.

Accepted Answer

A) True 
 B)False

Question 16

The future value of an annuity of $1,000 each quarter for 10 years, deposited at 12 percent compounded quarterly is

Accepted Answer

A) $17,549 
B) $75,401 
C) $93,049 
D) $11,200 
A) $17,549 
B) $75,401 
C) $93,049 
D) $11,200

Question 17

If $1,000 were invested now at a 12% interest rate compounded annually, what would be the value of the investment in two years?

Accepted Answer

A) $1,254 
B) $1,210 
C) $1,188 
D) $1,160 
A) $1,254 
B) $1,210 
C) $1,188 
D) $1,160

Question 18

Assume that a borrower is willing to pay you $2,000 at the end of three years in return for a sum of money now.To receive a return of 10%, how much are you willing to lend now?

Accepted Answer

A) $1,502 
B) $1,786 
C) $1,802 
D) $1,818 
A) $1,502 
B) $1,786 
C) $1,802 
D) $1,818

Question 19

At a zero interest rate, the present value of $1 remains at $1 and is not affected by time.

Accepted Answer

A) True 
 B)False

Question 20

A ski chalet in Vail now costs $250,000 to rent for a week during February.Inflation is expected to cause this price to increase at 5 percent per year over the next 10 years before Curly Howard and his wife retire from successful investment banking careers.How large an equal annual end-of-year deposit must be made into an account paying an annual rate of interest of 13 percent in order to buy the ski chalet upon retirement?

Accepted Answer

A) $8,333 
B) $13,572 
C) $25,005 
D) $22,109 
A) $8,333 
B) $13,572 
C) $25,005 
D) $22,109

In actual practice, most corporate bonds pay interest four times a year. Not in chapter

If the interest rate is 0% for 10 years, then the present value will be less than the future value.

The present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent, is

The annual percentage rate is the true opportunity cost measure of the interest rate.

The basic future and present value equations contain four variables.Which one of the following is not included?

The present value of an annuity of $5,000 to be received at the end of each of the nextevery six months for over 6 years at a 4% annual rate would be:

Barach ObamaBarbara borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual installments.The actual end-of-year payment is

An annuity due may also be referred to as a deferred annuity.

What is the highest effective rate attainable with a 12 percent nominal rate?

The future value of $2,000 invested today at 6% in 3 years would result in a future value of:

The values of stocks and bonds are not affected by time value of money concepts.

If we will receive $100 per year beginning one year from now for a period of three years with a 12% discount rate, what would be the value of our investment today?

For a given discount rate, an ordinary annuity and an annuity due have the same present value.

The future value of an annuity of $1,000 each quarter for 10 years, deposited at 12 percent compounded quarterly is

If $1,000 were invested now at a 12% interest rate compounded annually, what would be the value of the investment in two years?

Assume that a borrower is willing to pay you $2,000 at the end of three years in return for a sum of money now.To receive a return of 10%, how much are you willing to lend now?

At a zero interest rate, the present value of $1 remains at $1 and is not affected by time.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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Exam 9: Time Value of Money

In actual practice, most corporate bonds pay interest four times a year. Not in chapter

If the interest rate is 0% for 10 years, then the present value will be less than the future value.

The present value of $1,000 received at the end of year 1, $1,200 received at the end of year 2, and $1,300 received at the end of year 3, assuming an opportunity cost of 7 percent, is

The annual percentage rate is the true opportunity cost measure of the interest rate.

The basic future and present value equations contain four variables.Which one of the following is not included?

The present value of an annuity of $5,000 to be received at the end of each of the nextevery six months for over 6 years at a 4% annual rate would be:

Barach ObamaBarbara borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual installments.The actual end-of-year payment is

An annuity due may also be referred to as a deferred annuity.

What is the highest effective rate attainable with a 12 percent nominal rate?

The future value of $2,000 invested today at 6% in 3 years would result in a future value of:

The values of stocks and bonds are not affected by time value of money concepts.

If we will receive $100 per year beginning one year from now for a period of three years with a 12% discount rate, what would be the value of our investment today?

For a given discount rate, an ordinary annuity and an annuity due have the same present value.

The future value of an annuity of $1,000 each quarter for 10 years, deposited at 12 percent compounded quarterly is

If $1,000 were invested now at a 12% interest rate compounded annually, what would be the value of the investment in two years?

Assume that a borrower is willing to pay you $2,000 at the end of three years in return for a sum of money now.To receive a return of 10%, how much are you willing to lend now?

At a zero interest rate, the present value of $1 remains at $1 and is not affected by time.

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

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