Question 1

An annuity with an infinite life is called a (n)

Accepted Answer

A) perpetuity. 
B) infinity. 
C) effective annual rate. 
D) continuous annuity. 
A) perpetuity. 
B) infinity. 
C) effective annual rate. 
D) continuous annuity.

Question 2

Anders owns stock in a company which has consistently paid a growing dividend over the last 10 years.The first year Alexis owned the stock, he received $4.50 per share and in the 10th year, he received $4.92 per share.What is the growth rate of the dividends over the last 10 yearsduring this time?

Accepted Answer

A) 8% 
B) 4% 
C) 2% 
D) 1% 
A) 8% 
B) 4% 
C) 2% 
D) 1%

Question 3

Tracey deposits $5,000 in a five-year certificate of deposit paying 6% compounded semi-annually.How much will Tracey have at the end of the five-year period?

Accepted Answer

A) $6,720 
B) $6,690 
C) $6,596 
D) $6,910 
A) $6,720 
B) $6,690 
C) $6,596 
D) $6,910

Question 4

An ordinary annuity exists when the equal payments occur at the beginning of each time period.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following terms best describes an annuity due?

Accepted Answer

A) a perpetuity 
B) unequal payments 
C) payment at beginning of year 
D) payment at the end of the year 
A) a perpetuity 
B) unequal payments 
C) payment at beginning of year 
D) payment at the end of the year

Question 6

The future value of $100 received today and deposited at 6 percent for four years is

Accepted Answer

A) $126. 
B) $ 79. 
C) $124. 
D) $116. 
A) $126. 
B) $ 79. 
C) $124. 
D) $116.

Question 7

If the compound inflation rate were greater than the compound interest rate, future purchasing power on our savings would fall.

Accepted Answer

A) True 
 B)False

Question 8

Discounting Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate.
Changed as original answer incorrect.Discounting is the same as compounding but in different time order.(PV compounds to FV; FV discounts to PV)

Accepted Answer

A) True 
 B)False

Question 9

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

Accepted Answer

A) annual percentage rate 
B) compound rate of interest 
C) stated rate of interest 
D) effective annual rate 
A) annual percentage rate 
B) compound rate of interest 
C) stated rate of interest 
D) effective annual rate

Question 10

The method of calculating the annual percentage rate (APR) is set by law.

Accepted Answer

A) True 
 B)False

Question 11

You need $8,000 four years from now for a down payment on your future house.How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

Accepted Answer

A) $6,269.59 
B) $6,578.95 
C) $6,394.12 
D) $6,189.83 
A) $6,269.59 
B) $6,578.95 
C) $6,394.12 
D) $6,189.83

Question 12

Angelina has planned to start her college education four years from now.To pay for her college education, she has decided to save $1,000 each quarter for the next four years in a bank account paying 12 percent interest.How much will she have at the end of the fourth year?

Accepted Answer

A) $1,574 
B) $19,116 
C) $20,157 
D) $16,000 
A) $1,574 
B) $19,116 
C) $20,157 
D) $16,000

Question 13

Anders was given a gold coin originally purchased for $1 by his great-grandfather 50 years ago.Today the coin is worth $450.The rate of return realized on the sale of this coin is approximately equal to

Accepted Answer

A) 8% 
B) 13% 
C) 50% 
D) cannot be determined with the given information 
A) 8% 
B) 13% 
C) 50% 
D) cannot be determined with the given information

Question 14

You deposit $1,000 in a long-term certificate of deposit with an fixed interest rate of 9%.How many years will it take for you to triple your deposit? Pick the closest
Answer.

Accepted Answer

A) 11 years 
B) 12 years 
C) 13 years 
D) 14 years 
A) 11 years 
B) 12 years 
C) 13 years 
D) 14 years

Question 15

The present value of an annuity of $5,000 to be received at the end of each of the 6 years at a discount rate of 4% would be:

Accepted Answer

A) $26,210 
B) $33,165 
C) $3,950 
D) none of the above 
A) $26,210 
B) $33,165 
C) $3,950 
D) none of the above

Question 16

When solving for the future value of an amount deposited now, which one of the following factors would not be an inputpart of the calculation?

Accepted Answer

A) present value amount 
B) 1 plus the interest rate 
C) 1 divided by the sum of 1 plus the interest rate 
D) number of periods to compound over 
A) present value amount 
B) 1 plus the interest rate 
C) 1 divided by the sum of 1 plus the interest rate 
D) number of periods to compound over

Question 17

The future value of $200 received today and deposited at 8 percent for three years is

Accepted Answer

A) $248. 
B) $252. 
C) $158. 
D) $200. 
A) $248. 
B) $252. 
C) $158. 
D) $200.

Question 18

Consolidated Freightways is financing a new truck with a loan of $60,000 to be repaid in six annual end-of-year installments of $13,375.What annual interest rate is Consolidated Freightways paying?

Accepted Answer

A) 7% 
B) 8% 
C) 9% 
D) 10% 
A) 7% 
B) 8% 
C) 9% 
D) 10%

Question 19

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

Accepted Answer

A) changes proportionally. 
B) increases. 
C) decreases. 
D) remains unchanged. 
A) changes proportionally. 
B) increases. 
C) decreases. 
D) remains unchanged.

Question 20

A generous benefactor to the local university plans to make a one-time endowment which would provide the university with $150,000 per year into perpetuity.The rate of interest is expected to be 5 percent for all future time periods.How large must the endowment be?

Accepted Answer

A) $300,000 
B) $3,000,000. 
C) $750,000. 
D) $1,428,571. 
A) $300,000 
B) $3,000,000. 
C) $750,000. 
D) $1,428,571.

An annuity with an infinite life is called a (n)

Anders owns stock in a company which has consistently paid a growing dividend over the last 10 years.The first year Alexis owned the stock, he received $4.50 per share and in the 10th year, he received $4.92 per share.What is the growth rate of the dividends over the last 10 yearsduring this time?

Tracey deposits $5,000 in a five-year certificate of deposit paying 6% compounded semi-annually.How much will Tracey have at the end of the five-year period?

An ordinary annuity exists when the equal payments occur at the beginning of each time period.

Which of the following terms best describes an annuity due?

The future value of $100 received today and deposited at 6 percent for four years is

If the compound inflation rate were greater than the compound interest rate, future purchasing power on our savings would fall.

Discounting Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate. Changed as original answer incorrect.Discounting is the same as compounding but in different time order.(PV compounds to FV; FV discounts to PV)

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

The method of calculating the annual percentage rate (APR) is set by law.

You need $8,000 four years from now for a down payment on your future house.How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

Angelina has planned to start her college education four years from now.To pay for her college education, she has decided to save $1,000 each quarter for the next four years in a bank account paying 12 percent interest.How much will she have at the end of the fourth year?

Anders was given a gold coin originally purchased for $1 by his great-grandfather 50 years ago.Today the coin is worth $450.The rate of return realized on the sale of this coin is approximately equal to

You deposit $1,000 in a long-term certificate of deposit with an fixed interest rate of 9%.How many years will it take for you to triple your deposit? Pick the closest Answer.

The present value of an annuity of $5,000 to be received at the end of each of the 6 years at a discount rate of 4% would be:

When solving for the future value of an amount deposited now, which one of the following factors would not be an inputpart of the calculation?

The future value of $200 received today and deposited at 8 percent for three years is

Consolidated Freightways is financing a new truck with a loan of $60,000 to be repaid in six annual end-of-year installments of $13,375.What annual interest rate is Consolidated Freightways paying?

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

A generous benefactor to the local university plans to make a one-time endowment which would provide the university with $150,000 per year into perpetuity.The rate of interest is expected to be 5 percent for all future time periods.How large must the endowment be?

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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

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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

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Exam 9: Time Value of Money

An annuity with an infinite life is called a (n)

Anders owns stock in a company which has consistently paid a growing dividend over the last 10 years.The first year Alexis owned the stock, he received $4.50 per share and in the 10th year, he received $4.92 per share.What is the growth rate of the dividends over the last 10 yearsduring this time?

Tracey deposits $5,000 in a five-year certificate of deposit paying 6% compounded semi-annually.How much will Tracey have at the end of the five-year period?

An ordinary annuity exists when the equal payments occur at the beginning of each time period.

Which of the following terms best describes an annuity due?

The future value of $100 received today and deposited at 6 percent for four years is

If the compound inflation rate were greater than the compound interest rate, future purchasing power on our savings would fall.

Discounting Compounding means that interest earned each year, plus the principal, will be reinvested at the stated rate. Changed as original answer incorrect.Discounting is the same as compounding but in different time order.(PV compounds to FV; FV discounts to PV)

The interest rate that measures the true interest rate when compounding occurs more frequently than once a year is called the:

The method of calculating the annual percentage rate (APR) is set by law.

You need $8,000 four years from now for a down payment on your future house.How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

Angelina has planned to start her college education four years from now.To pay for her college education, she has decided to save $1,000 each quarter for the next four years in a bank account paying 12 percent interest.How much will she have at the end of the fourth year?

Anders was given a gold coin originally purchased for $1 by his great-grandfather 50 years ago.Today the coin is worth $450.The rate of return realized on the sale of this coin is approximately equal to

You deposit $1,000 in a long-term certificate of deposit with an fixed interest rate of 9%.How many years will it take for you to triple your deposit? Pick the closest Answer.

The present value of an annuity of $5,000 to be received at the end of each of the 6 years at a discount rate of 4% would be:

When solving for the future value of an amount deposited now, which one of the following factors would not be an inputpart of the calculation?

The future value of $200 received today and deposited at 8 percent for three years is

Consolidated Freightways is financing a new truck with a loan of $60,000 to be repaid in six annual end-of-year installments of $13,375.What annual interest rate is Consolidated Freightways paying?

For a given interest rate, as the length of time until receipt of the funds increases, the present value interest factor

A generous benefactor to the local university plans to make a one-time endowment which would provide the university with $150,000 per year into perpetuity.The rate of interest is expected to be 5 percent for all future time periods.How large must the endowment be?

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

Filters