Question 1

Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.

Accepted Answer

A) 100 percent 
B) 10 percent 
C) 1 percent 
D) 15 percent 
A) 100 percent 
B) 10 percent 
C) 1 percent 
D) 15 percent

Question 2

Which of the following is the equivalent of $300 received today?

Accepted Answer

A) $795.99 to be received 20 years in the future assuming a 5 percent annual interest rate. 
B) $100 to be received two years from now and $200 three years from now. 
C) $300 compounded at 10 percent for one year. 
D) All of these are the equivalent of $300 received today. 
A) $795.99 to be received 20 years in the future assuming a 5 percent annual interest rate. 
B) $100 to be received two years from now and $200 three years from now. 
C) $300 compounded at 10 percent for one year. 
D) All of these are the equivalent of $300 received today.

Question 3

Your firm receives an offer from the supplier who provides computer chips used to manufacture cell phones.Due to poor planning,the supplier has an excess amount of chips and is willing to sell $600,000 worth of chips for only $500,000.You already have two years' supply on hand.It would cost you $7,500 today to store the chips until your firm needs them in two years.What implied interest rate would you be earning if you purchased and store the chips?

Accepted Answer

A) 6.57 percent 
B) 8.73 percent 
C) 9.54 percent 
D) 18.23 percent 
A) 6.57 percent 
B) 8.73 percent 
C) 9.54 percent 
D) 18.23 percent

Question 4

What annual rate of return is earned on a $895 investment that grows to $1,976 in eight years?

Accepted Answer

A) 9.14 percent 
B) 9.97 percent 
C) 10.41 percent 
D) 11.73 percent 
A) 9.14 percent 
B) 9.97 percent 
C) 10.41 percent 
D) 11.73 percent

Question 5

Solving for Rates What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $8,000 by the end of year 8?

Accepted Answer

A) 9.00 percent 
B) 12.00 percent 
C) 12.25 percent 
D) 50.00 percent 
A) 9.00 percent 
B) 12.00 percent 
C) 12.25 percent 
D) 50.00 percent

Question 6

You invested $1,000 for 5 years in an account that earns 5 percent.However,today you learn that you are able to move the account into an investment that earns 10 percent.Which of the following statements is correct?

Accepted Answer

A) If you select the investment earning 10 percent, you will double your profit. 
B) If you select the investment earning 10 percent, you will more than double your profit. 
C) If you select the investment earning 10 percent, your profit will be less than double. 
D) None of these statements is correct. 
A) If you select the investment earning 10 percent, you will double your profit. 
B) If you select the investment earning 10 percent, you will more than double your profit. 
C) If you select the investment earning 10 percent, your profit will be less than double. 
D) None of these statements is correct.

Question 7

Rates over One Year Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

Accepted Answer

A) 0.89 percent 
B) 1.13 percent 
C) 5.56 percent 
D) 13.0 percent 
A) 0.89 percent 
B) 1.13 percent 
C) 5.56 percent 
D) 13.0 percent

Question 8

What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years?

Accepted Answer

A) $5,779.57 
B) $5,912.42 
C) $6,005.71 
D) $6,407.13 
A) $5,779.57 
B) $5,912.42 
C) $6,005.71 
D) $6,407.13

Question 9

Moving cash flows from one point in time to another requires us to use:

Accepted Answer

A) only present value equations. 
B) only future value equations. 
C) both present value and future value equations. 
D) the Rule of 72. 
A) only present value equations. 
B) only future value equations. 
C) both present value and future value equations. 
D) the Rule of 72.

Question 10

Approximately what rate is needed to double an investment over five years?

Accepted Answer

A) 8 percent 
B) 12.2 percent 
C) 14.4 percent 
D) 15.8 percent 
A) 8 percent 
B) 12.2 percent 
C) 14.4 percent 
D) 15.8 percent

Question 11

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Accepted Answer

A) 7.20 years 
B) 16.89 years 
C) 17.46 years 
D) 40.00 years 
A) 7.20 years 
B) 16.89 years 
C) 17.46 years 
D) 40.00 years

Question 12

Approximately how many years does it take to double a $475 investment when interest rates are 8 percent per year?

Accepted Answer

A) 18 years 
B) 12 years 
C) 9 years 
D) 4.75 years 
A) 18 years 
B) 12 years 
C) 9 years 
D) 4.75 years

Question 13

Interest-on-Interest Consider a $200 deposit earning 8 percent interest per year for three years.How much total interest is earned on interest (excluding interest earned on the original deposit)?

Accepted Answer

A) $3.94 
B) $24.00 
C) $48.00 
D) $51.94 
A) $3.94 
B) $24.00 
C) $48.00 
D) $51.94

Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.

Which of the following is the equivalent of $300 received today?

What annual rate of return is earned on a $895 investment that grows to $1,976 in eight years?

Solving for Rates What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $8,000 by the end of year 8?

You invested $1,000 for 5 years in an account that earns 5 percent.However,today you learn that you are able to move the account into an investment that earns 10 percent.Which of the following statements is correct?

Rates over One Year Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years?

Moving cash flows from one point in time to another requires us to use:

Approximately what rate is needed to double an investment over five years?

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Approximately how many years does it take to double a $475 investment when interest rates are 8 percent per year?

Interest-on-Interest Consider a $200 deposit earning 8 percent interest per year for three years.How much total interest is earned on interest (excluding interest earned on the original deposit)?

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

Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.

Which of the following is the equivalent of $300 received today?

What annual rate of return is earned on a $895 investment that grows to $1,976 in eight years?

Solving for Rates What annual rate of return is earned on a $4,000 investment made in year 2 when it grows to $8,000 by the end of year 8?

You invested $1,000 for 5 years in an account that earns 5 percent.However,today you learn that you are able to move the account into an investment that earns 10 percent.Which of the following statements is correct?

Rates over One Year Determine the interest rate earned on a $450 deposit when $475 is paid back in one year.

What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years 6 through 13 and increase to 18 percent in the remaining years?

Moving cash flows from one point in time to another requires us to use:

Approximately what rate is needed to double an investment over five years?

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Approximately how many years does it take to double a $475 investment when interest rates are 8 percent per year?

Interest-on-Interest Consider a $200 deposit earning 8 percent interest per year for three years.How much total interest is earned on interest (excluding interest earned on the original deposit)?

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