Question 1

How do you calculate (mathematically)the present value of a(n):
(a)perpetuity
(b)annuity
(c)growing perpetuity
(d)growing annuity

Accepted Answer

(a)PV of a perpetuity = @#IMG-DLM& (b)PV

Question 2

Consider the following timeline:   If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

Accepted Answer

A)  $1720 
B)  $1500 
C)  $1404 
D)  $1717 
A)  $1720 
B)  $1500 
C)  $1404 
D)  $1717

Question 3

Use the following information to answer the question(s) below.
Your great aunt Matilda put some money in an account for you on the day you were born. This account pays 8% interest per year. On your 21st birthday the account balance was $5,033.83.
-The amount of money that your great aunt Matilda originally put in the account is closest to:

Accepted Answer

A)  $600 
B)  $800 
C)  $1,000 
D)  $1,200 
A)  $600 
B)  $800 
C)  $1,000 
D)  $1,200

Question 4

Use the information for the question(s) below.
Joe just inherited the family business, and having no desire to run the family business, he has decided to sell it to an entrepreneur. In exchange for the family business, Joe has been offered an immediate payment of $100,000. Joe will also receive payments of $50,000 in one year, $50,000 in two years, and $75,000 in three years. The current market rate of interest for Joe is 6%.
-Draw a timeline detailing Joe's cash flows from the sale of the family business.

Accepted Answer

The answer of Use the information for the question(s) below.
Joe...

Question 5

If the current rate of interest is 8% APR,then the future value of an investment that pays $250 per quarter and lasts 20 years is closest to:

Accepted Answer

A)  $18,519 
B)  $48,443 
C)  $9,936 
D)  $20,000 
A)  $18,519 
B)  $48,443 
C)  $9,936 
D)  $20,000

Question 6

At an annual interest rate of 7%,the present value of $5,000 received in five years is closest to:

Accepted Answer

A)  $3,565 
B)  $6,750 
C)  $7,015 
D)  $7,035 
A)  $3,565 
B)  $6,750 
C)  $7,015 
D)  $7,035

Question 7

At an annual interest rate of 7%,the future value of this timeline in year 3 is closest to:

Accepted Answer

A)  $3,295 
B)  $3,600 
C)  $3,770 
D)  $4,035 
A)  $3,295 
B)  $3,600 
C)  $3,770 
D)  $4,035

Question 8

Use the figure for the question(s) below.  
-Which of the following statements regarding the timeline is FALSE?

Accepted Answer

A)  Date 1 is the end of the first year. 
B)  Date 0 is the beginning of the first year. 
C)  The space between date 0 and date 1 represents the time period between two specific dates. 
D)  You will find the timeline most useful in tracking cash flows if you interpret each point on the timeline as a period or interval of time. 
A)  Date 1 is the end of the first year. 
B)  Date 0 is the beginning of the first year. 
C)  The space between date 0 and date 1 represents the time period between two specific dates. 
D)  You will find the timeline most useful in tracking cash flows if you interpret each point on the timeline as a period or interval of time.

Question 9

Use the information for the question(s) below.
Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%.
-The future value at retirement (age 65)of your savings is closest to:

Accepted Answer

A)  $497,530 
B)  $928,895 
C)  $1,263,236 
D)  $108,000 
A)  $497,530 
B)  $928,895 
C)  $1,263,236 
D)  $108,000

Question 10

Suppose that you are considering an investment that will pay you $4000 per year for the next five years.The appropriate rate of interest is 5%.You want to know the present value of the cash flows from this investment.To solve this problem in Microsoft Excel,you would use which of the following excel formulas?

Accepted Answer

A)  =PV(.05,5,4000,0,0) 
B)  =PV(.05,5,4000,0,1) 
C)  =PV(5,.05,4000,0) 
D)  =PV(5,5,4000,0) 
A)  =PV(.05,5,4000,0,0) 
B)  =PV(.05,5,4000,0,1) 
C)  =PV(5,.05,4000,0) 
D)  =PV(5,5,4000,0)

Question 11

Use the figure for the question(s) below.  
-Which of the following statements regarding the timeline is FALSE?

Accepted Answer

A)  Date 1 is one year from now. 
B)  The $5000 below date 1 is the payment you will receive at the end of the first year. 
C)  The $5000 below date 2 is the payment you will receive at the beginning of the second year. 
D)  Date 0 represents today. 
A)  Date 1 is one year from now. 
B)  The $5000 below date 1 is the payment you will receive at the end of the first year. 
C)  The $5000 below date 2 is the payment you will receive at the beginning of the second year. 
D)  Date 0 represents today.

Question 12

Which of the following statements regarding growing annuities is FALSE?

Accepted Answer

A)  A growing annuity is a stream of N growing cash flows, paid at regular intervals. 
B)  We assume that g

D)  A growing annuity is like a growing perpetuity that never comes to an end. 
A)  A growing annuity is a stream of N growing cash flows, paid at regular intervals. 
B)  We assume that g

D)  A growing annuity is like a growing perpetuity that never comes to an end.

Question 13

You are considering investing in a zero coupon bond that will pay you its face value of $1000 in ten years.If the bond is currently selling for $485.20,then the IRR for investing in this bond is closest to:

Accepted Answer

A)  12% 
B)  8.0% 
C)  7.5% 
D)  10% 
A)  12% 
B)  8.0% 
C)  7.5% 
D)  10%

Question 14

Use the table for the question(s) below.
  
-Draw a timeline detailing the cash flows from investment "B."

Accepted Answer

The answer of Use the table for the question(s) below.
...

Question 15

You have an investment opportunity that will cost you $10,000 today,but return $12,500 to you in one year.The IRR of this investment opportunity is closest to:

Accepted Answer

A)  80% 
B)  125% 
C)  20% 
D)  25% 
A)  80% 
B)  125% 
C)  20% 
D)  25%

Question 16

Which of the following statements is FALSE?

Accepted Answer

A)  FV =   
B)  PV =  
  
C)  FV =   Cn × (1 + r)n 
D)  Most investment opportunities have multiple cash flows that occur at different points in time. 
A)  FV =   
B)  PV =  
  
C)  FV =   Cn × (1 + r)n 
D)  Most investment opportunities have multiple cash flows that occur at different points in time.

Question 17

Use the information for the question(s) below.
Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child's college education. Currently, college tuition, books, fees, and other costs, average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year.
-Assuming that college costs continue to increase an average of 4% per year and that all her college savings are invested in an account paying 7% interest,then the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education is closest to:

Accepted Answer

This is a two step problem.
Step #1 dete

Question 18

Since your first birthday,your grandparents have been depositing $1000 into a savings account on every one of your birthdays.The account pays 4% interest annually.Immediately after your grandparents make the deposit on your 18th birthday,the amount of money in your savings account will be closest to:

Accepted Answer

A)  $25,645 
B)  $36,465 
C)  $12,659 
D)  $18,000 
A)  $25,645 
B)  $36,465 
C)  $12,659 
D)  $18,000

Question 19

Which of the following statements regarding growing perpetuities is FALSE?

Accepted Answer

A)  We assume that r < g for a growing perpetuity. 
B)  PV of a growing perpetuity =   
C)  To find the value of a growing perpetuity one cash flow at a time would take forever. 
D)  A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever. 
A)  We assume that r < g for a growing perpetuity. 
B)  PV of a growing perpetuity =   
C)  To find the value of a growing perpetuity one cash flow at a time would take forever. 
D)  A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever.

Question 20

Use the following information to answer the question(s) below.
Nielson Motors is considering an opportunity that requires an investment of $1,000,000 today and will provide $250,000 one year from now, $450,000 two years from now, and $650,000 three years from now.
-The Internal Rate of return of this project is closest to:

Accepted Answer

A)  10.2% 
B)  12.2% 
C)  14.2% 
D)  16.2% 
A)  10.2% 
B)  12.2% 
C)  14.2% 
D)  16.2%

How do you calculate (mathematically)the present value of a(n): (a)perpetuity (b)annuity (c)growing perpetuity (d)growing annuity

Consider the following timeline: If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

If the current rate of interest is 8% APR,then the future value of an investment that pays $250 per quarter and lasts 20 years is closest to:

At an annual interest rate of 7%,the present value of $5,000 received in five years is closest to:

At an annual interest rate of 7%,the future value of this timeline in year 3 is closest to:

Use the figure for the question(s) below. -Which of the following statements regarding the timeline is FALSE?

Use the figure for the question(s) below. -Which of the following statements regarding the timeline is FALSE?

Which of the following statements regarding growing annuities is FALSE?

You are considering investing in a zero coupon bond that will pay you its face value of $1000 in ten years.If the bond is currently selling for $485.20,then the IRR for investing in this bond is closest to:

Use the table for the question(s) below. -Draw a timeline detailing the cash flows from investment "B."

You have an investment opportunity that will cost you $10,000 today,but return $12,500 to you in one year.The IRR of this investment opportunity is closest to:

Which of the following statements is FALSE?

Which of the following statements regarding growing perpetuities is FALSE?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

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Exam 4: The Time Value of Money

How do you calculate (mathematically)the present value of a(n): (a)perpetuity (b)annuity (c)growing perpetuity (d)growing annuity

Consider the following timeline: If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

If the current rate of interest is 8% APR,then the future value of an investment that pays $250 per quarter and lasts 20 years is closest to:

At an annual interest rate of 7%,the present value of $5,000 received in five years is closest to:

At an annual interest rate of 7%,the future value of this timeline in year 3 is closest to:

Use the figure for the question(s) below. -Which of the following statements regarding the timeline is FALSE?

Use the figure for the question(s) below. -Which of the following statements regarding the timeline is FALSE?

Which of the following statements regarding growing annuities is FALSE?

You are considering investing in a zero coupon bond that will pay you its face value of $1000 in ten years.If the bond is currently selling for $485.20,then the IRR for investing in this bond is closest to:

Use the table for the question(s) below. -Draw a timeline detailing the cash flows from investment "B."

You have an investment opportunity that will cost you $10,000 today,but return $12,500 to you in one year.The IRR of this investment opportunity is closest to:

Which of the following statements is FALSE?

Which of the following statements regarding growing perpetuities is FALSE?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Filters