Question 1

Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year, assuming the firm can earn 17 percent on its investments.

Accepted Answer

A)  $20,724 
B)  $20,127 
C)  $23,550 
D)  $23,350 
A)  $20,724 
B)  $20,127 
C)  $23,550 
D)  $23,350

Question 2

The nominal and effective rates are equivalent for annual compounding.

Accepted Answer

A) True 
 B)False

Question 3

Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is ________.

Accepted Answer

A)  $277.95 
B)  $405.00 
C)  $352.00 
D)  $147.00 
A)  $277.95 
B)  $405.00 
C)  $352.00 
D)  $147.00

Question 4

The annual percentage rate (APR) is the nominal rate of interest, found by multiplying the periodic rate by the number of periods in one year.

Accepted Answer

A) True 
 B)False

Question 5

The effective rate of interest and compounding frequency are inversely related.

Accepted Answer

A) True 
 B)False

Question 6

You have provided your friend with a service worth $8,500. Your friend offers you the following cash flow instead of paying $8,500 today. Should you accept his offer if your opportunity cost is 8 percent?

Accepted Answer

The answer of You have provided your friend with a...

Question 7

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 25 percent.

Accepted Answer

A)  $27,168 
B)  $35,200 
C)  $34,000 
D)  $32,500 
A)  $27,168 
B)  $35,200 
C)  $34,000 
D)  $32,500

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

Dorothy borrows $10,000 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $3,223.73. The annual interest rate on the loan is

Accepted Answer

A)  9 percent. 
B)  10 percent. 
C)  11 percent. 
D)  12 percent. 
A)  9 percent. 
B)  10 percent. 
C)  11 percent. 
D)  12 percent.

Question 11

Dan and Jia are newlyweds and have just purchased a condominium for $70,000. Since the condo is very small, they hope to move into a single-family house in 5 years. How much will their condo worth in 5 years if inflation is expected to be 8 percent?

Accepted Answer

PV = $70,000, r = 8%

Question 12

The effective annual rate increases with increasing compounding frequency.

Accepted Answer

A) True 
 B)False

Question 13

The future value of $100 received today and deposited in an account for four years paying semiannual interest of 6 percent is

Accepted Answer

A)  $450. 
B)  $126. 
C)  $889. 
D)  $134. 
A)  $450. 
B)  $126. 
C)  $889. 
D)  $134.

Question 14

What effective annual rate of return (EAR) would Rayne need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years?

Accepted Answer

A)  5.98% 
B)  6.55% 
C)  4.87% 
D)  6.14% 
A)  5.98% 
B)  6.55% 
C)  4.87% 
D)  6.14%

Question 15

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 14 percent.

Accepted Answer

A)  $121,256 
B)  $ 69,000 
C)  $ 60,513 
D)  $ 51,885 
A)  $121,256 
B)  $ 69,000 
C)  $ 60,513 
D)  $ 51,885

Question 16

A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?

Accepted Answer

A)  $95,000 
B)  $19,000 
C)  $190,000 
D)  $18,000 
A)  $95,000 
B)  $19,000 
C)  $190,000 
D)  $18,000

Question 17

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 18

Dottie has decided to set up an account that will pay her granddaughter (Lexi) $5,000 a year indefinitely. How much should Dottie deposit in an account paying 8 percent annual interest?

Accepted Answer

PV = 5,000

Question 19

The time value concept/calculation used in amortizing a loan is

Accepted Answer

A)  future value of a dollar. 
B)  future value of an annuity. 
C)  present value of a dollar. 
D)  present value of an annuity. 
A)  future value of a dollar. 
B)  future value of an annuity. 
C)  present value of a dollar. 
D)  present value of an annuity.

Question 20

Timothy borrows $6,930 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $2,281.86. Calculate the interest rate on the loan.

Accepted Answer

Using financial calc

Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year, assuming the firm can earn 17 percent on its investments.

The nominal and effective rates are equivalent for annual compounding.

Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is ________.

The annual percentage rate (APR) is the nominal rate of interest, found by multiplying the periodic rate by the number of periods in one year.

The effective rate of interest and compounding frequency are inversely related.

You have provided your friend with a service worth $8,500. Your friend offers you the following cash flow instead of paying $8,500 today. Should you accept his offer if your opportunity cost is 8 percent?

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 25 percent.

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

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

Dorothy borrows $10,000 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $3,223.73. The annual interest rate on the loan is

Dan and Jia are newlyweds and have just purchased a condominium for $70,000. Since the condo is very small, they hope to move into a single-family house in 5 years. How much will their condo worth in 5 years if inflation is expected to be 8 percent?

The effective annual rate increases with increasing compounding frequency.

The future value of $100 received today and deposited in an account for four years paying semiannual interest of 6 percent is

What effective annual rate of return (EAR) would Rayne need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years?

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 14 percent.

A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?

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

Dottie has decided to set up an account that will pay her granddaughter (Lexi) $5,000 a year indefinitely. How much should Dottie deposit in an account paying 8 percent annual interest?

The time value concept/calculation used in amortizing a loan is

Timothy borrows $6,930 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $2,281.86. Calculate the interest rate on the loan.

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

Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year, assuming the firm can earn 17 percent on its investments.

The nominal and effective rates are equivalent for annual compounding.

Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in three equal annual installments. The interest paid in the third year is ________.

The annual percentage rate (APR) is the nominal rate of interest, found by multiplying the periodic rate by the number of periods in one year.

The effective rate of interest and compounding frequency are inversely related.

You have provided your friend with a service worth $8,500. Your friend offers you the following cash flow instead of paying $8,500 today. Should you accept his offer if your opportunity cost is 8 percent?

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 25 percent.

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

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

Dorothy borrows $10,000 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $3,223.73. The annual interest rate on the loan is

Dan and Jia are newlyweds and have just purchased a condominium for $70,000. Since the condo is very small, they hope to move into a single-family house in 5 years. How much will their condo worth in 5 years if inflation is expected to be 8 percent?

The effective annual rate increases with increasing compounding frequency.

The future value of $100 received today and deposited in an account for four years paying semiannual interest of 6 percent is

What effective annual rate of return (EAR) would Rayne need to earn if she deposits $1,000 per month into an account beginning one month from today in order to have a total of $1,000,000 in 30 years?

Find the present value of the following stream of cash flows, assuming that the firm's opportunity cost is 14 percent.

A college received a contribution to its endowment fund of $2 million. They can never touch the principal, but they can use the earnings. At an assumed interest rate of 9.5 percent, how much can the college earn to help its operations each year?

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

Dottie has decided to set up an account that will pay her granddaughter (Lexi) $5,000 a year indefinitely. How much should Dottie deposit in an account paying 8 percent annual interest?

The time value concept/calculation used in amortizing a loan is

Timothy borrows $6,930 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $2,281.86. Calculate the interest rate on the loan.

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