Question 1

Detta borrows $20,000 from the bank.For a five-year loan,the bank requires annual end-of-year payments of $4,878.05.The annual interest rate on the loan is ________.

Accepted Answer

A)  6 percent 
B)  7 percent 
C)  8 percent 
D)  9 percent 
A)  6 percent 
B)  7 percent 
C)  8 percent 
D)  9 percent

Question 2

If you expect to retire in 30 years,live on $50,000 per year and expect the inflation to average 3% over the next 30 years,what amount of annual income will you need to live at the same comfort level in 30 years?

Accepted Answer

A)  $121,363 
B)  $$95,000 
C)  $20,599 
D)  $51,500 
A)  $121,363 
B)  $$95,000 
C)  $20,599 
D)  $51,500

Question 3

A wealthy industrialist wishes to establish a $2,000,000 trust fund which will provide income for his grandchild into perpetuity.He stipulates in the trust agreement that the principal may not be distributed.The grandchild may only receive the interest earned.If the interest rate earned on the trust is expected to be at least 7 percent in all future periods,how much income will the grandchild receive each year?

Accepted Answer

$2,000,000

Question 4

Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments.The interest paid in the first year is ________.

Accepted Answer

A)  $1,155 
B)  $2,481 
C)  $ 144 
D)  $1,327 
A)  $1,155 
B)  $2,481 
C)  $ 144 
D)  $1,327

Question 5

Hayley makes annual end-of-year payments of $6,260.96 on a five-year loan with an 8 percent interest rate.The original principal amount was ________.

Accepted Answer

A)  $31,000 
B)  $30,000 
C)  $25,000 
D)  $20,000 
A)  $31,000 
B)  $30,000 
C)  $25,000 
D)  $20,000

Question 6

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 7

Calculate the present value of $89,000 to be received in 15 years,assuming an opportunity cost of 14 percent.

Accepted Answer

PV = 89,00

Question 8

Brian borrows $5,000 from a bank at 8 percent annually compounded interest to be repaid in five annual installments.Calculate the principal paid in the third year.

Accepted Answer

PV= 5000,I=8,N=3,FV=

Question 9

Future value is the value of a future amount at the present time,found by applying compound interest over a specified period of time.

Accepted Answer

A) True 
 B)False

Question 10

When computing an interest or growth rate,the rate will increase with an increase in future value,holding present value and the number of periods constant.

Accepted Answer

A) True 
 B)False

Question 11

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)  $3,044 
C)  $6,516 
D)  $2,856 
A)  $2,500 
B)  $3,044 
C)  $6,516 
D)  $2,856

Question 12

To buy his favorite car,Larry is planning to accumulate money by investing his Christmas bonuses for the next five years in a security which pays a 10 percent annual rate of return.The car will cost $20,000 at the end of the fifth year and Larry's Christmas bonus is $3,000 a year.Will Larry accumulate enough money to buy the car?

Accepted Answer

Using financial calculator: PV=0,N=5,PMT

Question 13

Marc has purchased a new car for $15,000.He paid $2,500 as down payment and he paid the balance by a loan from his hometown bank.The loan is to be paid on a monthly basis for two years charging 12 percent interest.How much are the monthly payments?

Accepted Answer

PV = 15,000 - 2,500 = $12,500,

Question 14

Mr.& Mrs.Pribel wish to purchase a boat in 8 years when they retire.They are planning to purchase the boat using proceeds from the sale of their property which is currently worth $90,000 and its value is growing at 7 percent a year.The boat is currently worth $200,000 increasing at 5 percent per year.In addition to the value of their property,how much additional money should they deposit at the end of each year in an account paying 9 percent annual interest in order to be able to buy the boat upon retirement?

Accepted Answer

Value of the property upon retirement:
P

Question 15

Everything else being equal,the longer the period of time,the lower the present value.

Accepted Answer

A) True 
 B)False

Question 16

Adam 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 17

Xiao Li wishes to accumulate $50,000 by the end of 10 years by making equal annual end-of-year deposits over the next 10 years.If Xiao Li can earn 5 percent on her investments,how much must she deposit at the end of each year?

Accepted Answer

A)  $3,975 
B)  $6,475 
C)  $5,000 
D)  $4,513 
A)  $3,975 
B)  $6,475 
C)  $5,000 
D)  $4,513

Question 18

Nancy would like to accumulate $10,000 by the end of 3 years from now to buy a sports car from her friend,Jim.She has $2,500 now and would like to save equal annual end-of-year deposits to pay for the car.How much should she deposit at the end of each year in an account paying 8 percent interest to buy the car?

Accepted Answer

Using financial calc

Question 19

$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)  $17,072 
C)  $12,510 
D)  $ 8,142 
A)  $ 6,700 
B)  $17,072 
C)  $12,510 
D)  $ 8,142

Question 20

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

Accepted Answer

A)  $380 
B)  $158 
C)  $253 
D)  $252 
A)  $380 
B)  $158 
C)  $253 
D)  $252

Detta borrows $20,000 from the bank.For a five-year loan,the bank requires annual end-of-year payments of $4,878.05.The annual interest rate on the loan is ________.

If you expect to retire in 30 years,live on $50,000 per year and expect the inflation to average 3% over the next 30 years,what amount of annual income will you need to live at the same comfort level in 30 years?

Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments.The interest paid in the first year is ________.

Hayley makes annual end-of-year payments of $6,260.96 on a five-year loan with an 8 percent interest rate.The original principal amount was ________.

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

Calculate the present value of $89,000 to be received in 15 years,assuming an opportunity cost of 14 percent.

Brian borrows $5,000 from a bank at 8 percent annually compounded interest to be repaid in five annual installments.Calculate the principal paid in the third year.

Future value is the value of a future amount at the present time,found by applying compound interest over a specified period of time.

When computing an interest or growth rate,the rate will increase with an increase in future value,holding present value and the number of periods constant.

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 ________.

Marc has purchased a new car for $15,000.He paid $2,500 as down payment and he paid the balance by a loan from his hometown bank.The loan is to be paid on a monthly basis for two years charging 12 percent interest.How much are the monthly payments?

Everything else being equal,the longer the period of time,the lower the present value.

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

Xiao Li wishes to accumulate $50,000 by the end of 10 years by making equal annual end-of-year deposits over the next 10 years.If Xiao Li can earn 5 percent on her investments,how much must she deposit at the end of each 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 future value of $200 received today and deposited at 8 percent compounded semiannually for three years is ________.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters

Exam 5: Time Value of Money

Detta borrows $20,000 from the bank.For a five-year loan,the bank requires annual end-of-year payments of $4,878.05.The annual interest rate on the loan is ________.

If you expect to retire in 30 years,live on $50,000 per year and expect the inflation to average 3% over the next 30 years,what amount of annual income will you need to live at the same comfort level in 30 years?

Danny Joe borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments.The interest paid in the first year is ________.

Hayley makes annual end-of-year payments of $6,260.96 on a five-year loan with an 8 percent interest rate.The original principal amount was ________.

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

Calculate the present value of $89,000 to be received in 15 years,assuming an opportunity cost of 14 percent.

Brian borrows $5,000 from a bank at 8 percent annually compounded interest to be repaid in five annual installments.Calculate the principal paid in the third year.

Future value is the value of a future amount at the present time,found by applying compound interest over a specified period of time.

When computing an interest or growth rate,the rate will increase with an increase in future value,holding present value and the number of periods constant.

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 ________.

Marc has purchased a new car for $15,000.He paid $2,500 as down payment and he paid the balance by a loan from his hometown bank.The loan is to be paid on a monthly basis for two years charging 12 percent interest.How much are the monthly payments?

Everything else being equal,the longer the period of time,the lower the present value.

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

Xiao Li wishes to accumulate $50,000 by the end of 10 years by making equal annual end-of-year deposits over the next 10 years.If Xiao Li can earn 5 percent on her investments,how much must she deposit at the end of each 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 future value of $200 received today and deposited at 8 percent compounded semiannually for three years is ________.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Cash Flow and Financial Planning

Interest Rates and Bond Valuation

Stock Valuation

Risk and Return

The Cost of Capital

Capital Budgeting Techniques

Capital Budgeting Cash Flows and Risk Refinements

Leverage and Capital Structure

Payout Policy

Working Capital and Current Assets Management

Current Liabilities Management

Filters