Question 1

How many years (and months)will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

Accepted Answer

A)  15 years and 2.29 months 
B)  17 years and 5.6 months 
C)  18 years and 3.8 months 
D)  19 years and 2.4 months 
A)  15 years and 2.29 months 
B)  17 years and 5.6 months 
C)  18 years and 3.8 months 
D)  19 years and 2.4 months A

Question 2

What annual rate of return is earned on a $10,000 investment when it grows to $15,000 in 10 years?

Accepted Answer

A)  1.50 percent 
B)  3.97 percent 
C)  4.14 percent 
D)  5.00 percent 
A)  1.50 percent 
B)  3.97 percent 
C)  4.14 percent 
D)  5.00 percent C

Question 3

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

Question 4

As the production manager of HPG,Inc.,you have received an offer from the supplier who provides the wires used in headsets.Due to poor planning,the supplier has an excess amount of wire and is willing to sell $750,000 worth for only $600,000.You already have one year's supply of wire on hand.This new wire would be used one year from today.What implied interest rate would your firm be earning if you purchased the wire?

Accepted Answer

A)  −20 percent 
B)  13.5 percent 
C)  21 percent 
D)  25 percent 
A)  −20 percent 
B)  13.5 percent 
C)  21 percent 
D)  25 percent

Question 5

You borrow $10,000 and will pay back the entire amount in 10 years.You are charged 6 percent interest per year.How much interest do you pay on this loan?

Accepted Answer

A)  $6,000.00 
B)  $7,715.61 
C)  $7,908.48 
D)  $11,193.97 
A)  $6,000.00 
B)  $7,715.61 
C)  $7,908.48 
D)  $11,193.97

Question 6

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 7

Consider a $500 deposit earning 5 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

Accepted Answer

A)  $13.14 
B)  $25.00 
C)  $125.00 
D)  $138.14 
A)  $13.14 
B)  $25.00 
C)  $125.00 
D)  $138.14

Question 8

Which of the following would you prefer?

Accepted Answer

A)  four hundred dollars to be received in nine years when rates are 8 percent 
B)  two hundred ten dollars today 
C)  five hundred dollars to be received in 12 years when rates are 8 percent 
D)  five hundred dollars to be received in 12 years when rates are 9 percent 
A)  four hundred dollars to be received in nine years when rates are 8 percent 
B)  two hundred ten dollars today 
C)  five hundred dollars to be received in 12 years when rates are 8 percent 
D)  five hundred dollars to be received in 12 years when rates are 9 percent

Question 9

You are scheduled to pay a $350 cash flow in one year,and receive a $1,000 cash flow in years 3 and 4.If interest rates are 10 percent per year,what is the combined present value of these cash flows?

Accepted Answer

A)  $991.38 
B)  $1,097.14 
C)  $1,116.14 
D)  $1,213.92 
A)  $991.38 
B)  $1,097.14 
C)  $1,116.14 
D)  $1,213.92

Question 10

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 11

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 12

What is the present value of a $200 payment made in three years when the discount rate is 8 percent?

Accepted Answer

A)  $150.00 
B)  $158.77 
C)  $251.94 
D)  $515.42 
A)  $150.00 
B)  $158.77 
C)  $251.94 
D)  $515.42

Question 13

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

Question 14

How many years will it take $1 million to grow to $3 million with an annual interest rate of 7 percent?

Accepted Answer

A)  10.29 years 
B)  14.52 years 
C)  16.24 years 
D)  33.33 years 
A)  10.29 years 
B)  14.52 years 
C)  16.24 years 
D)  33.33 years

Question 15

You want to retire in 40 years and you have $40,000 saved in your retirement account.You believe you will need $1,500,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

Accepted Answer

A)  6.75 percent 
B)  7.48 percent 
C)  9.13 percent 
D)  9.48 percent 
A)  6.75 percent 
B)  7.48 percent 
C)  9.13 percent 
D)  9.48 percent

Question 16

Assume you borrow $5,000 today and pay back the loan in one lump sum four years from today.You are charged 8 percent interest per year.What amount will you pay back and how much interest will you pay?

Accepted Answer

A)  $6,399.56, $1,399.56 
B)  $6,508.21, $1,508.21 
C)  $6,802.44, $1,802.44 
D)  $7,902.11, $2,902.11 
A)  $6,399.56, $1,399.56 
B)  $6,508.21, $1,508.21 
C)  $6,802.44, $1,802.44 
D)  $7,902.11, $2,902.11

Question 17

What is the present value of a $500 payment made in four years when the discount rate is 8 percent?

Accepted Answer

A)  $365.35 
B)  $367.51 
C)  $460.00 
D)  $680.24 
A)  $365.35 
B)  $367.51 
C)  $460.00 
D)  $680.24

Question 18

What is the future value of $700 deposited for one year earning 4 percent interest rate annually?

Accepted Answer

A)  $28 
B)  $700 
C)  $728 
D)  $1,428 
A)  $28 
B)  $700 
C)  $728 
D)  $1,428

Question 19

Consider a $1,000 deposit earning 7 percent interest per year for four years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

Accepted Answer

A)  $28.00 
B)  $30.00 
C)  $280.00 
D)  $310.00 
A)  $28.00 
B)  $30.00 
C)  $280.00 
D)  $310.00

Question 20

You double your money in five 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.

How many years (and months)will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

What annual rate of return is earned on a $10,000 investment when it grows to $15,000 in 10 years?

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

You borrow $10,000 and will pay back the entire amount in 10 years.You are charged 6 percent interest per year.How much interest do you pay on this loan?

People borrow money because they expect

Consider a $500 deposit earning 5 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

Which of the following would you prefer?

You are scheduled to pay a $350 cash flow in one year,and receive a $1,000 cash flow in years 3 and 4.If interest rates are 10 percent per year,what is the combined present value of these cash flows?

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?

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

What is the present value of a $200 payment made in three years when the discount rate is 8 percent?

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)?

How many years will it take $1 million to grow to $3 million with an annual interest rate of 7 percent?

You want to retire in 40 years and you have $40,000 saved in your retirement account.You believe you will need $1,500,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

Assume you borrow $5,000 today and pay back the loan in one lump sum four years from today.You are charged 8 percent interest per year.What amount will you pay back and how much interest will you pay?

What is the present value of a $500 payment made in four years when the discount rate is 8 percent?

What is the future value of $700 deposited for one year earning 4 percent interest rate annually?

Consider a $1,000 deposit earning 7 percent interest per year for four years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

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

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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 Management and Policies

Filters

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

How many years (and months)will it take $1 million to grow to $3 million with an annual interest rate of 7.5 percent?

What annual rate of return is earned on a $10,000 investment when it grows to $15,000 in 10 years?

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

You borrow $10,000 and will pay back the entire amount in 10 years.You are charged 6 percent interest per year.How much interest do you pay on this loan?

People borrow money because they expect

Consider a $500 deposit earning 5 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

Which of the following would you prefer?

You are scheduled to pay a $350 cash flow in one year,and receive a $1,000 cash flow in years 3 and 4.If interest rates are 10 percent per year,what is the combined present value of these cash flows?

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?

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

What is the present value of a $200 payment made in three years when the discount rate is 8 percent?

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)?

How many years will it take $1 million to grow to $3 million with an annual interest rate of 7 percent?

You want to retire in 40 years and you have $40,000 saved in your retirement account.You believe you will need $1,500,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

Assume you borrow $5,000 today and pay back the loan in one lump sum four years from today.You are charged 8 percent interest per year.What amount will you pay back and how much interest will you pay?

What is the present value of a $500 payment made in four years when the discount rate is 8 percent?

What is the future value of $700 deposited for one year earning 4 percent interest rate annually?

Consider a $1,000 deposit earning 7 percent interest per year for four years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

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

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

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 Management and Policies

Filters