Question 1

A dollar paid (or received)in the future is:

Accepted Answer

A) worth more than a dollar paid (or received) today. 
B) worth as much as a dollar paid (or received) today. 
C) not worth as much as a dollar paid (or received) today. 
D) not comparable to a dollar paid (or received) today. 
A) worth more than a dollar paid (or received) today. 
B) worth as much as a dollar paid (or received) today. 
C) not worth as much as a dollar paid (or received) today. 
D) not comparable to a dollar paid (or received) today.

Question 2

Rule of 72 Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

Accepted Answer

A) 0.06 years 
B) 6 years 
C) 6.94 years 
D) 18 years 
A) 0.06 years 
B) 6 years 
C) 6.94 years 
D) 18 years

Question 3

Future Value At age 25 you invest $2,000 that earns 6 percent each year.At age 35 you invest $2,000 that earns 9 percent per year.In which case would you have more money at age 60?

Accepted Answer

A) At age 25 invest $2,000 at 6 percent. 
B) At age 35 invest $2,000 at 9 percent. 
C) Both yield the same amount at age 60. 
D) There is not enough information to determine which case earns the most money at age 60. 
A) At age 25 invest $2,000 at 6 percent. 
B) At age 35 invest $2,000 at 9 percent. 
C) Both yield the same amount at age 60. 
D) There is not enough information to determine which case earns the most money at age 60.

Question 4

Moving Cash Flows What is the value in year 6 of a $900 cash flow made in year 4 when the interest rates are 8 percent?

Accepted Answer

A) $1,044.00 
B) $1,049.76 
C) $1,332.00 
D) $1,428.19 
A) $1,044.00 
B) $1,049.76 
C) $1,332.00 
D) $1,428.19

Question 5

Solving for Time How many years will it take $200 to grow to $250 with an annual interest rate of 4 percent?

Accepted Answer

A) 1.24 years 
B) 5.69 years 
C) 6.25 years 
D) 18.00 years 
A) 1.24 years 
B) 5.69 years 
C) 6.25 years 
D) 18.00 years

Question 6

A deposit of $500 earns 5 percent the first year,6 percent the second year and 7 percent the third year.What would be the third year future value?

Accepted Answer

A) $595.46 
B) $615.62 
C) $634.91 
D) $671.02 
A) $595.46 
B) $615.62 
C) $634.91 
D) $671.02

Question 7

People borrow money because they expect:

Accepted Answer

A) their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan. 
B) the time value of money to apply only if they are saving money. 
C) interest rates to rise. 
D) that consumers don't need to calculate the impact of interest on their purchases. 
A) their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan. 
B) the time value of money to apply only if they are saving money. 
C) interest rates to rise. 
D) that consumers don't need to calculate the impact of interest on their purchases.

Question 8

Rule of 72 Approximately what interest rate is needed to double an investment over eight years?

Accepted Answer

A) 8 percent 
B) 9 percent 
C) 12 percent 
D) 100 percent 
A) 8 percent 
B) 9 percent 
C) 12 percent 
D) 100 percent

Question 9

We call the process of earning interest on both the original deposit and on the earlier interest payments:

Accepted Answer

A) simple interest. 
B) compounding. 
C) future value. 
D) discounting. 
A) simple interest. 
B) compounding. 
C) future value. 
D) discounting.

Question 10

Which of the following statements is incorrect with respect to time lines?

Accepted Answer

A) A helpful tool for organizing our analysis is the time line. 
B) Cash flows we receive are called inflows and denoted with a positive number. 
C) Cash flows we pay out are called outflows and designated with a negative number. 
D) Interest rates are not included on our time lines. 
A) A helpful tool for organizing our analysis is the time line. 
B) Cash flows we receive are called inflows and denoted with a positive number. 
C) Cash flows we pay out are called outflows and designated with a negative number. 
D) Interest rates are not included on our time lines.

Question 11

How are present values affected by changes in interest rates?

Accepted Answer

A) The lower the interest rate, the larger the present value will be. 
B) The higher the interest rate, the larger the present value will be. 
C) Present values are not affected by changes in interest rates. 
D) One would need to know the future value in order to determine the impact. 
A) The lower the interest rate, the larger the present value will be. 
B) The higher the interest rate, the larger the present value will be. 
C) Present values are not affected by changes in interest rates. 
D) One would need to know the future value in order to determine the impact.

Question 12

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

Accepted Answer

A) 4.97 years 
B) 7.42 years 
C) 10.72 years 
D) 17.67 years 
A) 4.97 years 
B) 7.42 years 
C) 10.72 years 
D) 17.67 years

Question 13

What would be more valuable,receiving $1,000 today or receiving $3,000 in 10 years when interest rates are 8 percent? Why?

Accepted Answer

There are two ways to figure this:
1.The

Question 14

How many years (and months)will it take $4 million to grow to $7 million with an annual interest rate of 12 percent?

Accepted Answer

A) 4 years and 1.92 month 
B) 4 years and 11.28 months 
C) 5 years and 6.54 months 
D) 5 years and 10.86 months 
A) 4 years and 1.92 month 
B) 4 years and 11.28 months 
C) 5 years and 6.54 months 
D) 5 years and 10.86 months

Question 15

You double your money in 5 years.The reason your return is not 20 percent per year is because:

Accepted Answer

A) it is probably a "fad" investment. 
B) it does not reflect the effect of discounting. 
C) it does not reflect the effect of the Rule of 72. 
D) it does not reflect the effect of compounding. 
A) it is probably a "fad" investment. 
B) it does not reflect the effect of discounting. 
C) it does not reflect the effect of the Rule of 72. 
D) it does not reflect the effect of compounding.

Question 16

Rule of 72 Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

Accepted Answer

A) 0.08 years 
B) 8 years 
C) 8.33 years 
D) 12 years 
A) 0.08 years 
B) 8 years 
C) 8.33 years 
D) 12 years

Question 17

You are scheduled to receive a $750 cash flow in one year,a $1,000 cash flow in two years,and pay a $300 payment in four years.If interest rates are 6 percent per year,what is the combined present value of these cash flows?

Accepted Answer

A) $1,359.92 
B) $1,413.92 
C) $1,592.63 
D) $1,613.02 
A) $1,359.92 
B) $1,413.92 
C) $1,592.63 
D) $1,613.02

Question 18

When computing the rate of return from selling an investment,the number of years between the present and future cash flows is an important factor in determining:

Accepted Answer

A) the annual rate earned. 
B) the annual payments required. 
C) whether the present value or the future value is a cash inflow. 
D) whether the present value or the future value is a cash outflow. 
A) the annual rate earned. 
B) the annual payments required. 
C) whether the present value or the future value is a cash inflow. 
D) whether the present value or the future value is a cash outflow.

Question 19

Moving Cash Flows What is the value in year 5 of a $600 cash flow made in year 10 when interest rates are 5 percent?

Accepted Answer

A) $368.35 
B) $450.00 
C) $470.12 
D) $570.00 
A) $368.35 
B) $450.00 
C) $470.12 
D) $570.00

Question 20

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1,2 percent in year 2,12 percent in year 3,and 9 percent in years 4 and 5.

Accepted Answer

A) $2,679.15 
B) $2,206.81 
C) $2,317.03 
D) $2,362.19 
A) $2,679.15 
B) $2,206.81 
C) $2,317.03 
D) $2,362.19

A dollar paid (or received)in the future is:

Rule of 72 Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

Future Value At age 25 you invest $2,000 that earns 6 percent each year.At age 35 you invest $2,000 that earns 9 percent per year.In which case would you have more money at age 60?

Moving Cash Flows What is the value in year 6 of a $900 cash flow made in year 4 when the interest rates are 8 percent?

Solving for Time How many years will it take $200 to grow to $250 with an annual interest rate of 4 percent?

A deposit of $500 earns 5 percent the first year,6 percent the second year and 7 percent the third year.What would be the third year future value?

People borrow money because they expect:

Rule of 72 Approximately what interest rate is needed to double an investment over eight years?

We call the process of earning interest on both the original deposit and on the earlier interest payments:

Which of the following statements is incorrect with respect to time lines?

How are present values affected by changes in interest rates?

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

What would be more valuable,receiving $1,000 today or receiving $3,000 in 10 years when interest rates are 8 percent? Why?

How many years (and months)will it take $4 million to grow to $7 million with an annual interest rate of 12 percent?

You double your money in 5 years.The reason your return is not 20 percent per year is because:

Rule of 72 Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

You are scheduled to receive a $750 cash flow in one year,a $1,000 cash flow in two years,and pay a $300 payment in four years.If interest rates are 6 percent per year,what is the combined present value of these cash flows?

When computing the rate of return from selling an investment,the number of years between the present and future cash flows is an important factor in determining:

Moving Cash Flows What is the value in year 5 of a $600 cash flow made in year 10 when interest rates are 5 percent?

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1,2 percent in year 2,12 percent in year 3,and 9 percent in years 4 and 5.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 4: Time Value of Money

A dollar paid (or received)in the future is:

Rule of 72 Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

Future Value At age 25 you invest $2,000 that earns 6 percent each year.At age 35 you invest $2,000 that earns 9 percent per year.In which case would you have more money at age 60?

Moving Cash Flows What is the value in year 6 of a $900 cash flow made in year 4 when the interest rates are 8 percent?

Solving for Time How many years will it take $200 to grow to $250 with an annual interest rate of 4 percent?

A deposit of $500 earns 5 percent the first year,6 percent the second year and 7 percent the third year.What would be the third year future value?

People borrow money because they expect:

Rule of 72 Approximately what interest rate is needed to double an investment over eight years?

We call the process of earning interest on both the original deposit and on the earlier interest payments:

Which of the following statements is incorrect with respect to time lines?

How are present values affected by changes in interest rates?

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

What would be more valuable,receiving $1,000 today or receiving $3,000 in 10 years when interest rates are 8 percent? Why?

How many years (and months)will it take $4 million to grow to $7 million with an annual interest rate of 12 percent?

You double your money in 5 years.The reason your return is not 20 percent per year is because:

Rule of 72 Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

You are scheduled to receive a $750 cash flow in one year,a $1,000 cash flow in two years,and pay a $300 payment in four years.If interest rates are 6 percent per year,what is the combined present value of these cash flows?

When computing the rate of return from selling an investment,the number of years between the present and future cash flows is an important factor in determining:

Moving Cash Flows What is the value in year 5 of a $600 cash flow made in year 10 when interest rates are 5 percent?

Compute the present value of $4,000 paid in five years using the following discount rates: 10 percent in year 1,2 percent in year 2,12 percent in year 3,and 9 percent in years 4 and 5.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters