Question 1

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,what is the PRESENT VALUE of the project?

Accepted Answer

A)  $2,509,507 
B)  $2,547,837 
C)  $2,517,234 
D)  $2,499,159 
A)  $2,509,507 
B)  $2,547,837 
C)  $2,517,234 
D)  $2,499,159 B

Question 2

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following BEGINNING of the year cash flows.What is the FUTURE VALUE of the inflows at the end of the 4th year if the annual rate of interest is 10%?

Accepted Answer

A)  $5,238.02 
B)  $4,761.89 
C)  $4,635.21 
D)  $4,571.58 
A)  $5,238.02 
B)  $4,761.89 
C)  $4,635.21 
D)  $4,571.58 A

Question 3

You will receive a stream of payments BEGINNING at the end of year 1 and the amount will increase by $10 each year until the final payment at the end of year 5.If the first payment is $50,what amount will you have at the end of year 5 if you can invest all amounts at a 7% interest rate?

Accepted Answer

A)  $350.00 
B)  $374.50 
C)  $394.79 
D)  $422.43 
A)  $350.00 
B)  $374.50 
C)  $394.79 
D)  $422.43 C

Question 4

Which of the following investment opportunities has the highest present value if the discount rate is 10%?

Accepted Answer

A)  Investment A 
B)  Investment B 
C)  Investment C 
D)  The present value of Investments A and C are equal and higher than the present value of Investment B. 
A)  Investment A 
B)  Investment B 
C)  Investment C 
D)  The present value of Investments A and C are equal and higher than the present value of Investment B.

Question 5

If you can earn 5% (compounded annually)on an investment,how long does it take for your money to triple?

Accepted Answer

A)  14.40 years 
B)  22.52 years 
C)  19.48 years 
D)  29.29 years 
A)  14.40 years 
B)  22.52 years 
C)  19.48 years 
D)  29.29 years

Question 6

Suppose you are ready to buy your first house.To buy the house,you will take out a $140,000 mortgage from the bank.The bank offers you the mortgage for 30 years at an APR of 6.0% with interest compounded monthly.For your tenth monthly payment,what is the reduction in principal?

Accepted Answer

A)  $145.77 
B)  $156.18 
C)  $327.24 
D)  $359.64 
A)  $145.77 
B)  $156.18 
C)  $327.24 
D)  $359.64

Question 7

A $100 investment yields $112.55 in one year.The interest on the investment was compounded quarterly.From this information,what was the stated rate or APR of the investment?

Accepted Answer

A)  12.55% 
B)  12.25% 
C)  12.15% 
D)  12.00% 
A)  12.55% 
B)  12.25% 
C)  12.15% 
D)  12.00%

Question 8

If you were evaluating a investment over a 10-year period that paid 8% compounded semiannually:

Accepted Answer

A)  you would not need to make any special adjustments because the semiannual compounding will not impact the investment's future value. 
B)  you would need to divide the number of years by two and multiply the interest rate by two to properly adjust for the semiannual compounding. 
C)  you would need to divide the interest rate by two and multiply the number of years by two to properly adjust for the semiannual compounding. 
D)  None of the above 
A)  you would not need to make any special adjustments because the semiannual compounding will not impact the investment's future value. 
B)  you would need to divide the number of years by two and multiply the interest rate by two to properly adjust for the semiannual compounding. 
C)  you would need to divide the interest rate by two and multiply the number of years by two to properly adjust for the semiannual compounding. 
D)  None of the above

Question 9

In five years,you plan on starting graduate school to earn your MBA.You know that graduate school can be expensive and you expect you will need $15,000 per year for tuition and other school expenses.These payments will be made at the BEGINNING of the school year.To have enough money to attend graduate school,you decide to start saving TODAY by investing in a money market fund that pays 4% APR with monthly compounding.You will make monthly deposits into the account starting TODAY for the next five years.How much will you need to deposit each month to have enough savings for graduate school? (Assume that money that is not withdrawn remains in the account during graduate school and the MBA will take two years to complete.)

Accepted Answer

A)  $438.15 
B)  $440.26 
C)  $442.16 
D)  $443.64 
A)  $438.15 
B)  $440.26 
C)  $442.16 
D)  $443.64

Question 10

A bank is offering a new savings account that pays 8% per year.Which formula below shows the calculation for determining how long it will take a $100 investment to double?

Accepted Answer

A)  n =  
B)  n = 1.08ln(2) 
C)  n = 2ln(1.08) 
D)  n =   
A)  n =  
B)  n = 1.08ln(2) 
C)  n = 2ln(1.08) 
D)  n =

Question 11

After graduating from college with a finance degree,you begin an ambitious plan to retire in 25 years.To build up your retirement fund,you will make quarterly payments into a mutual fund that on average will pay 12% APR compounded quarterly.To get you started,a relative gives you a graduation gift of $5,000.Once retired,you plan on moving your investment to a money market fund that will pay 6% APR with monthly compounding.As a young retiree,you believe you will live for 30 more years and will make monthly withdrawals of $10,000.To meet your retirement needs,what quarterly payment should you make?

Accepted Answer

A)  $2,221.45 
B)  $2,588.27 
C)  $2,746.50 
D)  $2,904.73 
A)  $2,221.45 
B)  $2,588.27 
C)  $2,746.50 
D)  $2,904.73

Question 12

Michelle is buying a house and the mortgage terms are 30 years,monthly payments.If the interest rate is 5% (APR),what are the payments on a $150,000 loan?

Accepted Answer

A)  $7500 
B)  $9757 
C)  $ 805 
D)  $5229 
A)  $7500 
B)  $9757 
C)  $ 805 
D)  $5229

Question 13

Herbilux Botanicals forecasts the following cash flows at the end of each year for a project.If the firm's discount rate is 9%,what is the PRESENT VALUE of the project?

Accepted Answer

A)  $7,634,980 
B)  $8,015,517 
C)  $8,736,914 
D)  $12,268,998 
A)  $7,634,980 
B)  $8,015,517 
C)  $8,736,914 
D)  $12,268,998

Question 14

Great Lakes Christmas Tree Co.expects to pay an annual dividend of $2 per share in perpetuity on its preferred shares starting one year from now.The firm is committed solely to its steady North American Christmas tree business (as opposed to,say,diversifying into landscape shrubbery).This profile warrants a required return of 6%.What is the present value of this dividend stream for investors?

Accepted Answer

A)  $12.00 
B)  $1.89 
C)  $33.33 
D)  $2.12 
A)  $12.00 
B)  $1.89 
C)  $33.33 
D)  $2.12

Question 15

You've just won $1 million dollars in a lottery.For your prize,you may except a $1 million lump sum paid immediately,a constant perpetuity of $80,000 per year (with the first payment arriving in one year),or a stream of cash flows that starts at $45,000 next year and grows at 3.5% per year in perpetuity.If the interest rate is 8%,which of these choices has a higher present value?

Accepted Answer

A)  a $1 million lump sum 
B)  a constant stream of $80,000 per year in perpetuity 
C)  a stream that begins at $45,000 and grows at 3.5% in perpetuity 
D)  all three choices have the same present value 
A)  a $1 million lump sum 
B)  a constant stream of $80,000 per year in perpetuity 
C)  a stream that begins at $45,000 and grows at 3.5% in perpetuity 
D)  all three choices have the same present value

Question 16

Atlas Map Co.has purchased a new building for $45 million.If the value of the building increases at a rate of 5% per year,how much will the building be worth in 20 years?

Accepted Answer

A)  $119,398,397 
B)  $113,712,759 
C)  $16,960,027 
D)  $16,131,867 
A)  $119,398,397 
B)  $113,712,759 
C)  $16,960,027 
D)  $16,131,867

Question 17

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,COMPOUNDED CONTINOUSLY,what is the PRESENT VALUE of the project?

Accepted Answer

A)  $2,509,507 
B)  $2,547,837 
C)  $2,517,234 
D)  $2,499,159 
A)  $2,509,507 
B)  $2,547,837 
C)  $2,517,234 
D)  $2,499,159

Question 18

What is the present value of these cash flows,if the discount rate is 10% annually?

Accepted Answer

A)  $18,380.00 
B)  $12,620.90 
C)  $22,358.69 
D)  $14,765.52 
A)  $18,380.00 
B)  $12,620.90 
C)  $22,358.69 
D)  $14,765.52

Question 19

Which is NOT correct regarding an ordinary annuity and annuity due?

Accepted Answer

A)  An annuity is a series of equal payments. 
B)  The present value of an ordinary annuity is less than the present value of an annuity due (assuming interest rate is positive). 
C)  As the interest rate increases,the present value of an annuity decreases. 
D)  As the length of the annuity increases,the future value of the annuity decreases. 
A)  An annuity is a series of equal payments. 
B)  The present value of an ordinary annuity is less than the present value of an annuity due (assuming interest rate is positive). 
C)  As the interest rate increases,the present value of an annuity decreases. 
D)  As the length of the annuity increases,the future value of the annuity decreases.

Question 20

An athlete was offered the following contract for the next three years:   The athlete would rather have his salary in equal amounts at the END of each of the three years.If the discount rate for the athlete is 10%,what yearly amount would she consider EQUIVALENT to the offered contract?

Accepted Answer

A)  $5.37 million per year 
B)  $5.70 million per year 
C)  $6.71 million per year 
D)  $6.87 million per year 
A)  $5.37 million per year 
B)  $5.70 million per year 
C)  $6.71 million per year 
D)  $6.87 million per year

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,what is the PRESENT VALUE of the project?

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following BEGINNING of the year cash flows.What is the FUTURE VALUE of the inflows at the end of the 4th year if the annual rate of interest is 10%?

You will receive a stream of payments BEGINNING at the end of year 1 and the amount will increase by $10 each year until the final payment at the end of year 5.If the first payment is $50,what amount will you have at the end of year 5 if you can invest all amounts at a 7% interest rate?

Which of the following investment opportunities has the highest present value if the discount rate is 10%?

If you can earn 5% (compounded annually)on an investment,how long does it take for your money to triple?

Suppose you are ready to buy your first house.To buy the house,you will take out a $140,000 mortgage from the bank.The bank offers you the mortgage for 30 years at an APR of 6.0% with interest compounded monthly.For your tenth monthly payment,what is the reduction in principal?

A $100 investment yields $112.55 in one year.The interest on the investment was compounded quarterly.From this information,what was the stated rate or APR of the investment?

If you were evaluating a investment over a 10-year period that paid 8% compounded semiannually:

A bank is offering a new savings account that pays 8% per year.Which formula below shows the calculation for determining how long it will take a $100 investment to double?

Michelle is buying a house and the mortgage terms are 30 years,monthly payments.If the interest rate is 5% (APR),what are the payments on a $150,000 loan?

Herbilux Botanicals forecasts the following cash flows at the end of each year for a project.If the firm's discount rate is 9%,what is the PRESENT VALUE of the project?

Atlas Map Co.has purchased a new building for $45 million.If the value of the building increases at a rate of 5% per year,how much will the building be worth in 20 years?

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,COMPOUNDED CONTINOUSLY,what is the PRESENT VALUE of the project?

What is the present value of these cash flows,if the discount rate is 10% annually?

Which is NOT correct regarding an ordinary annuity and annuity due?

An athlete was offered the following contract for the next three years: The athlete would rather have his salary in equal amounts at the END of each of the three years.If the discount rate for the athlete is 10%,what yearly amount would she consider EQUIVALENT to the offered contract?

The Scope of Corporate Finance

Financial Statement and Cash Flow Analysis

Valuing Bonds

Valuing Stocks

The Trade-Off Between Risk and Return

Risk,return,and the Capital Asset Pricing Model

Capital Budgeting Process and Decision Criteria

Cash Flow and Capital Budgeting

Risk and Capital Budgeting

Raising Long-Term Financing

Capital Structure

Long-Term Debt and Leasing

Payout Policy

Financial Planning

Cash Conversion, inventory, and Receivables Management

Cash, payables, and Liquidity Management

International Financial Management

Options

Entrepreneurial Finance and Venture Capital

Mergers, acquisitions, and Corporate Control

Bankruptcy and Financial Distress

Risk Management

Filters

Exam 3: The Time Value of Money

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,what is the PRESENT VALUE of the project?

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following BEGINNING of the year cash flows.What is the FUTURE VALUE of the inflows at the end of the 4th year if the annual rate of interest is 10%?

You will receive a stream of payments BEGINNING at the end of year 1 and the amount will increase by $10 each year until the final payment at the end of year 5.If the first payment is $50,what amount will you have at the end of year 5 if you can invest all amounts at a 7% interest rate?

Which of the following investment opportunities has the highest present value if the discount rate is 10%?

If you can earn 5% (compounded annually)on an investment,how long does it take for your money to triple?

Suppose you are ready to buy your first house.To buy the house,you will take out a $140,000 mortgage from the bank.The bank offers you the mortgage for 30 years at an APR of 6.0% with interest compounded monthly.For your tenth monthly payment,what is the reduction in principal?

A $100 investment yields $112.55 in one year.The interest on the investment was compounded quarterly.From this information,what was the stated rate or APR of the investment?

If you were evaluating a investment over a 10-year period that paid 8% compounded semiannually:

A bank is offering a new savings account that pays 8% per year.Which formula below shows the calculation for determining how long it will take a $100 investment to double?

Michelle is buying a house and the mortgage terms are 30 years,monthly payments.If the interest rate is 5% (APR),what are the payments on a $150,000 loan?

Herbilux Botanicals forecasts the following cash flows at the end of each year for a project.If the firm's discount rate is 9%,what is the PRESENT VALUE of the project?

Atlas Map Co.has purchased a new building for $45 million.If the value of the building increases at a rate of 5% per year,how much will the building be worth in 20 years?

Mendelson Implements records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,COMPOUNDED CONTINOUSLY,what is the PRESENT VALUE of the project?

What is the present value of these cash flows,if the discount rate is 10% annually?

Which is NOT correct regarding an ordinary annuity and annuity due?

An athlete was offered the following contract for the next three years: The athlete would rather have his salary in equal amounts at the END of each of the three years.If the discount rate for the athlete is 10%,what yearly amount would she consider EQUIVALENT to the offered contract?

The Scope of Corporate Finance

Financial Statement and Cash Flow Analysis

Valuing Bonds

Valuing Stocks

The Trade-Off Between Risk and Return

Risk,return,and the Capital Asset Pricing Model

Capital Budgeting Process and Decision Criteria

Cash Flow and Capital Budgeting

Risk and Capital Budgeting

Raising Long-Term Financing

Capital Structure

Long-Term Debt and Leasing

Payout Policy

Financial Planning

Cash Conversion, inventory, and Receivables Management

Cash, payables, and Liquidity Management

International Financial Management

Options

Entrepreneurial Finance and Venture Capital

Mergers, acquisitions, and Corporate Control

Bankruptcy and Financial Distress

Risk Management

Filters