Question 1

The future value of $200 received today and deposited at 8 percent for three years is: (Round to the nearest whole dollar)

Accepted Answer

A)  $248 
B)  $252 
C)  $158 
D)  $200 
E)  $249 
A)  $248 
B)  $252 
C)  $158 
D)  $200 
E)  $249

Question 2

You have come across an investment opportunity that will give you $51,725.29 in 14 years if you put up $12,000 today.Calculate the annual return on this investment.

Accepted Answer

A)  11% 
B)  10% 
C)  12% 
D)  13% 
E)  9% 
A)  11% 
B)  10% 
C)  12% 
D)  13% 
E)  9%

Question 3

At an inflation rate of 9 percent,the purchasing power of $1 would be cut in half in 8.04 years.How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4 percent?

Accepted Answer

A)  12 years 
B)  15 years 
C)  18 years 
D)  20 years 
E)  23 years 
A)  12 years 
B)  15 years 
C)  18 years 
D)  20 years 
E)  23 years

Question 4

Shylock Bank offers a savings account with an effective interest rate of 15% and weekly compounding.What is the nominal rate (APR)on the account?

Accepted Answer

A)  14.00% 
B)  16.16% 
C)  14.05% 
D)  16.08% 
E)  15.00% 
A)  14.00% 
B)  16.16% 
C)  14.05% 
D)  16.08% 
E)  15.00%

Question 5

You can deposit your savings at the Darlington National Bank,which offers to pay 12.6 percent interest compounded monthly,or at the Barlett Bank,which will pay interest of 11.5 percent compounded daily.(Assume 365 days in a year.)Which bank offers the higher effective annual rate?

Accepted Answer

A)  Darlington National Bank 
B)  Barlett Bank 
C)  Both banks offer the same effective rate. 
D)  Cannot be determined from the information provided. 
E)  Workable only if the banks use the same compounding period. 
A)  Darlington National Bank 
B)  Barlett Bank 
C)  Both banks offer the same effective rate. 
D)  Cannot be determined from the information provided. 
E)  Workable only if the banks use the same compounding period.

Question 6

Suzanne has identified a project with the following cash flows.What is the present value of the cash flows at time 0 if the interest rate is 17%?

Accepted Answer

A)  $3,058.75 
B)  $3,578.74 
C)  $2,614.32 
D)  $4,225.00 
E)  $3,521.63 
A)  $3,058.75 
B)  $3,578.74 
C)  $2,614.32 
D)  $4,225.00 
E)  $3,521.63

Question 7

Leon's has a "Don't Pay For One Year" event on right now at the store,so you purchase an Italian,hand-stitched leather sofa.You will pay $1,267.99 for the sofa in one year.Leon's charges 18% annual interest compounded monthly on overdue payments.If you forget and don't pay for the sofa until 6 months after payment is due,how much will you pay for the sofa at that time?

Accepted Answer

A)  $1,386.48 
B)  $1,516.03 
C)  $1,657.70 
D)  $1,452.06 
E)  $1,377.39 
A)  $1,386.48 
B)  $1,516.03 
C)  $1,657.70 
D)  $1,452.06 
E)  $1,377.39

Question 8

Molly Costner deposits $2,500 in her checking account today.Her checking account pays interest of 2.5% compounded annually.Assuming Molly does not withdraw any funds and does not deposit any additional funds,how much will be in her account in 25 years?

Accepted Answer

A)  $4,096.54 
B)  $3,750.00 
C)  $4,102.52 
D)  $4,634.86 
E)  $4,062.50 
A)  $4,096.54 
B)  $3,750.00 
C)  $4,102.52 
D)  $4,634.86 
E)  $4,062.50

Question 9

Given some amount to be received several years in the future,if the interest rate increases,the present value of the future amount will be:

Accepted Answer

A)  Higher 
B)  Lower 
C)  Stay the same 
D)  Cannot tell 
E)  Variable 
A)  Higher 
B)  Lower 
C)  Stay the same 
D)  Cannot tell 
E)  Variable

Question 10

The Vanguard Windsor II mutual fund had a net asset value of $15.07 at the beginning of 1992 and $24.04 at the beginning of 1997.What was the approximate average annual growth rate in this measure over this period? (Round to the nearest whole number)

Accepted Answer

A)  60% 
B)  8% 
C)  10% 
D)  18% 
E)  15% 
A)  60% 
B)  8% 
C)  10% 
D)  18% 
E)  15%

Question 11

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $12,250 today?

Accepted Answer

A)  8.5% 
B)  7.5% 
C)  8.0% 
D)  9.0% 
E)  9.5% 
A)  8.5% 
B)  7.5% 
C)  8.0% 
D)  9.0% 
E)  9.5%

Question 12

Compute the simple interest earned on a 1-year $200 deposit that earns 6% per year.

Accepted Answer

A)  $6 
B)  $60 
C)  $120 
D)  $12 
E)  $200 
A)  $6 
B)  $60 
C)  $120 
D)  $12 
E)  $200

Question 13

$1,200 is received at the beginning of year 1,$2,200 is received at the beginning of year 2,and $3,300 is received at the beginning of year 3.If these cash flows are deposited at 12 percent,their combined future value at the end of year 3 is:

Accepted Answer

A)  $6,700 
B)  $17,000 
C)  $12,510 
D)  $7,504 
E)  $8,141 
A)  $6,700 
B)  $17,000 
C)  $12,510 
D)  $7,504 
E)  $8,141

Question 14

Charlene owns stock in a company which has consistently paid a growing dividend over the last five years.The first year Charlene 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 years? (Round to the nearest whole number)

Accepted Answer

A)  7 percent 
B)  14 percent 
C)  12 percent 
D)  5 percent 
E)  11 percent 
A)  7 percent 
B)  14 percent 
C)  12 percent 
D)  5 percent 
E)  11 percent

Question 15

The primary difference between simple and compound interest is that:

Accepted Answer

A)  Simple interest is only paid at the end of the investment period. 
B)  Compound interest entails receiving interest payments on previously earned interest. 
C)  Compound interest is paid up front and not when the investment matures. 
D)  Simple interest is not taxed by the federal government. 
E)  Simple interest earns a higher interest rate on reinvested interest than compound interest. 
A)  Simple interest is only paid at the end of the investment period. 
B)  Compound interest entails receiving interest payments on previously earned interest. 
C)  Compound interest is paid up front and not when the investment matures. 
D)  Simple interest is not taxed by the federal government. 
E)  Simple interest earns a higher interest rate on reinvested interest than compound interest.

Question 16

Casey has $1,000 to invest and would like to buy a $3,000 jet-ski in four years.If interest is compounded annually,what interest rate will she have to receive to reach her goal?

Accepted Answer

A)  300% 
B)  16% 
C)  32% 
D)  3% 
E)  7% 
A)  300% 
B)  16% 
C)  32% 
D)  3% 
E)  7%

Question 17

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $9,110 today?

Accepted Answer

A)  14.0% 
B)  13.0% 
C)  13.5% 
D)  14.5% 
E)  15.0% 
A)  14.0% 
B)  13.0% 
C)  13.5% 
D)  14.5% 
E)  15.0%

Question 18

You have $602.42 today.You want to accumulate $1,320 by investing your money.You have identified an investment that will generate a return of 4% per annum.How long will you have to invest (in years)in order to accumulate your desired total?

Accepted Answer

A)  20 years 
B)  17 years 
C)  19 years 
D)  21 years 
E)  22 years 
A)  20 years 
B)  17 years 
C)  19 years 
D)  21 years 
E)  22 years

Question 19

As the discount rate increases without limit,the present value of the future cash inflows:

Accepted Answer

A)  Gets larger without limit. 
B)  Stays unchanged. 
C)  Approaches zero. 
D)  Gets smaller without limit, i.e. approaches minus infinity. 
A)  Gets larger without limit. 
B)  Stays unchanged. 
C)  Approaches zero. 
D)  Gets smaller without limit, i.e. approaches minus infinity.

Question 20

In 6 years you are going to need $1,000 dollars.How much will you need to invest today at 7% in order to save the money you need?

Accepted Answer

A)  $666.34 
B)  $630.17 
C)  $790.31 
D)  $670.66 
E)  $596.27 
A)  $666.34 
B)  $630.17 
C)  $790.31 
D)  $670.66 
E)  $596.27

The future value of $200 received today and deposited at 8 percent for three years is: (Round to the nearest whole dollar)

You have come across an investment opportunity that will give you $51,725.29 in 14 years if you put up $12,000 today.Calculate the annual return on this investment.

At an inflation rate of 9 percent,the purchasing power of $1 would be cut in half in 8.04 years.How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4 percent?

Shylock Bank offers a savings account with an effective interest rate of 15% and weekly compounding.What is the nominal rate (APR)on the account?

You can deposit your savings at the Darlington National Bank,which offers to pay 12.6 percent interest compounded monthly,or at the Barlett Bank,which will pay interest of 11.5 percent compounded daily.(Assume 365 days in a year.)Which bank offers the higher effective annual rate?

Suzanne has identified a project with the following cash flows.What is the present value of the cash flows at time 0 if the interest rate is 17%?

Molly Costner deposits $2,500 in her checking account today.Her checking account pays interest of 2.5% compounded annually.Assuming Molly does not withdraw any funds and does not deposit any additional funds,how much will be in her account in 25 years?

Given some amount to be received several years in the future,if the interest rate increases,the present value of the future amount will be:

The Vanguard Windsor II mutual fund had a net asset value of $15.07 at the beginning of 1992 and $24.04 at the beginning of 1997.What was the approximate average annual growth rate in this measure over this period? (Round to the nearest whole number)

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $12,250 today?

Compute the simple interest earned on a 1-year $200 deposit that earns 6% per year.

$1,200 is received at the beginning of year 1,$2,200 is received at the beginning of year 2,and $3,300 is received at the beginning of year 3.If these cash flows are deposited at 12 percent,their combined future value at the end of year 3 is:

The primary difference between simple and compound interest is that:

Casey has $1,000 to invest and would like to buy a $3,000 jet-ski in four years.If interest is compounded annually,what interest rate will she have to receive to reach her goal?

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $9,110 today?

You have $602.42 today.You want to accumulate $1,320 by investing your money.You have identified an investment that will generate a return of 4% per annum.How long will you have to invest (in years)in order to accumulate your desired total?

As the discount rate increases without limit,the present value of the future cash inflows:

In 6 years you are going to need $1,000 dollars.How much will you need to invest today at 7% in order to save the money you need?

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Streams and Valuations

Risk and Return - Introduction

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, repurchases, and Splits

Financial Planning

The Management of Working Capital

International Finance

Filters

Exam 3: Time Value of Money - Introduction

The future value of $200 received today and deposited at 8 percent for three years is: (Round to the nearest whole dollar)

You have come across an investment opportunity that will give you $51,725.29 in 14 years if you put up $12,000 today.Calculate the annual return on this investment.

At an inflation rate of 9 percent,the purchasing power of $1 would be cut in half in 8.04 years.How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4 percent?

Shylock Bank offers a savings account with an effective interest rate of 15% and weekly compounding.What is the nominal rate (APR)on the account?

You can deposit your savings at the Darlington National Bank,which offers to pay 12.6 percent interest compounded monthly,or at the Barlett Bank,which will pay interest of 11.5 percent compounded daily.(Assume 365 days in a year.)Which bank offers the higher effective annual rate?

Suzanne has identified a project with the following cash flows.What is the present value of the cash flows at time 0 if the interest rate is 17%?

Molly Costner deposits $2,500 in her checking account today.Her checking account pays interest of 2.5% compounded annually.Assuming Molly does not withdraw any funds and does not deposit any additional funds,how much will be in her account in 25 years?

Given some amount to be received several years in the future,if the interest rate increases,the present value of the future amount will be:

The Vanguard Windsor II mutual fund had a net asset value of $15.07 at the beginning of 1992 and $24.04 at the beginning of 1997.What was the approximate average annual growth rate in this measure over this period? (Round to the nearest whole number)

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $12,250 today?

Compute the simple interest earned on a 1-year $200 deposit that earns 6% per year.

$1,200 is received at the beginning of year 1,$2,200 is received at the beginning of year 2,and $3,300 is received at the beginning of year 3.If these cash flows are deposited at 12 percent,their combined future value at the end of year 3 is:

The primary difference between simple and compound interest is that:

Casey has $1,000 to invest and would like to buy a $3,000 jet-ski in four years.If interest is compounded annually,what interest rate will she have to receive to reach her goal?

Jordan will need $20,000 at the end of 6 years to put a down payment on a house.What rate of return will he need to earn if he can invest $9,110 today?

You have $602.42 today.You want to accumulate $1,320 by investing your money.You have identified an investment that will generate a return of 4% per annum.How long will you have to invest (in years)in order to accumulate your desired total?

As the discount rate increases without limit,the present value of the future cash inflows:

In 6 years you are going to need $1,000 dollars.How much will you need to invest today at 7% in order to save the money you need?

Overview of Finance

Financial Statements and Ratio Analysis

Time Value of Money - Streams and Valuations

Risk and Return - Introduction

Portfolio Theory

Interest Rates and Bond Valuation

Stock Valuation and Market Efficiency

Capital Budgeting Techniques

Capital Budgeting - Cash Flows

Cost of Capital

Capital Structure

Dividends, repurchases, and Splits

Financial Planning

The Management of Working Capital

International Finance

Filters