Question 1

A stock investor deposited $3,450 six years ago.Today the account is valued at $2,180.What annual rate of return has this investor earned?

Accepted Answer

A)  7.95 percent 
B)  7.37 percent 
C)  10.26 percent 
D)  9.74 percent 
A)  7.95 percent 
B)  7.37 percent 
C)  10.26 percent 
D)  9.74 percent

Question 2

Five years ago,Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now).James can make a 20-year investment today and lock in a 10 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Accepted Answer

A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64 
A)  $3,160.43 
B)  $3,464.11 
C)  $5,089.91 
D)  $7,346.64

Question 3

You have $50,000 in your account.Assuming no additional deposits are made and your account earns 8 percent per year,how long will it take for the account to have a balance of $500,000?

Accepted Answer

A)  28.83 years 
B)  29.92 years 
C)  50.00 years 
D)  90.00 years 
A)  28.83 years 
B)  29.92 years 
C)  50.00 years 
D)  90.00 years

Question 4

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4,and increase to 6 percent in the remaining years?

Accepted Answer

A)  $1,215.51 
B)  $1,238.77 
C)  $2,970.03 
D)  $2,982.74 
A)  $1,215.51 
B)  $1,238.77 
C)  $2,970.03 
D)  $2,982.74

Question 5

How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

Accepted Answer

A)  1.12 years 
B)  1.48 years 
C)  1.53 years 
D)  9.00 years 
A)  1.12 years 
B)  1.48 years 
C)  1.53 years 
D)  9.00 years

Question 6

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 7

If an average home in your town currently costs $350,000,and house prices are expected to grow at an average rate of 3 percent per year,what will an average house cost in "5" years?

Accepted Answer

A)  $402,500.00 
B)  $405,168.75 
C)  $405,745.93 
D)  $507,500.00 
A)  $402,500.00 
B)  $405,168.75 
C)  $405,745.93 
D)  $507,500.00

Question 8

What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?

Accepted Answer

A)  4.55 percent 
B)  4.76 percent 
C)  6.90 percent 
D)  7.14 percent 
A)  4.55 percent 
B)  4.76 percent 
C)  6.90 percent 
D)  7.14 percent

Question 9

The process of figuring out how much an amount that you expect to receive in the future is worth today is called

Accepted Answer

A)  discounting. 
B)  multiplying. 
C)  compounding. 
D)  computing. 
A)  discounting. 
B)  multiplying. 
C)  compounding. 
D)  computing.

Question 10

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 11

A deposit of $500 earns the following interest rates? 5 percent in the first year,
6 percent in the second year,and
8 percent in the third year.
What would be the third year future value?

Accepted Answer

A)  $527.14 
B)  $595.00 
C)  $601.02 
D)  $1595.00 
A)  $527.14 
B)  $595.00 
C)  $601.02 
D)  $1595.00

Question 12

What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?

Accepted Answer

A)  $2,550 
B)  $2,850 
C)  $2,950 
D)  $3,150 
A)  $2,550 
B)  $2,850 
C)  $2,950 
D)  $3,150

Question 13

Which is more valuable,receiving $775 today or receiving $885 in 2.5 years if interest rates are 7.25 percent?

Accepted Answer

A)  receiving $775 today 
B)  receiving $885 in 2.5 years 
C)  They are worth the same amount 
D)  Need more information to make a determination. 
A)  receiving $775 today 
B)  receiving $885 in 2.5 years 
C)  They are worth the same amount 
D)  Need more information to make a determination.

Question 14

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

Question 15

Ten years ago,Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now).Aidan can make a 20-year investment today and lock in an 8 percent rate.How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Accepted Answer

A)  $1,589.03 
B)  $2,846.56 
C)  $3,109.48 
D)  $2,109.73 
A)  $1,589.03 
B)  $2,846.56 
C)  $3,109.48 
D)  $2,109.73

Question 16

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $5,500.What return did you earn? What return would you suffer next year for your investment to be valued at the original $5,000?

Accepted Answer

A)  10 percent, −9.09 percent, respectively 
B)  −10 percent, +9.09 percent, respectively 
C)  110 percent, −10 percent, respectively 
D)  110 percent, −9.09 percent, respectively 
A)  10 percent, −9.09 percent, respectively 
B)  −10 percent, +9.09 percent, respectively 
C)  110 percent, −10 percent, respectively 
D)  110 percent, −9.09 percent, respectively

Question 17

If an average home in your town currently costs $300,000,and house prices are expected to grow at an average rate of 5 percent per year,what will an average house cost in 10 years?

Accepted Answer

A)  $450,000.00 
B)  $483,153.01 
C)  $488,688.39 
D)  $507,593.74 
A)  $450,000.00 
B)  $483,153.01 
C)  $488,688.39 
D)  $507,593.74

Question 18

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

Accepted Answer

A)  discounting. 
B)  multiplying. 
C)  compounding. 
D)  computing. 
A)  discounting. 
B)  multiplying. 
C)  compounding. 
D)  computing.

Question 19

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

Accepted Answer

A)  $4,362.97 
B)  $4,491.27 
C)  $5,374.11 
D)  $5,572.19 
A)  $4,362.97 
B)  $4,491.27 
C)  $5,374.11 
D)  $5,572.19

Question 20

You invested $2,000 in the stock market one year ago.Today,the investment is valued at $9,500.What return did you earn? What return would you need to suffer next year for your investment to be valued at the original $2,000?

Accepted Answer

A)  −78.95 percent, 0 percent 
B)  375 percent, −78.95 percent 
C)  250 percent, −51.8 percent 
D)  −78.95 percent, 100 percent 
A)  −78.95 percent, 0 percent 
B)  375 percent, −78.95 percent 
C)  250 percent, −51.8 percent 
D)  −78.95 percent, 100 percent

A stock investor deposited $3,450 six years ago.Today the account is valued at $2,180.What annual rate of return has this investor earned?

Five years ago,Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now).James can make a 20-year investment today and lock in a 10 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

You have $50,000 in your account.Assuming no additional deposits are made and your account earns 8 percent per year,how long will it take for the account to have a balance of $500,000?

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4,and increase to 6 percent in the remaining years?

How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

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

If an average home in your town currently costs $350,000,and house prices are expected to grow at an average rate of 3 percent per year,what will an average house cost in "5" years?

What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?

The process of figuring out how much an amount that you expect to receive in the future is worth today is called

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?

A deposit of $500 earns the following interest rates? 5 percent in the first year, 6 percent in the second year,and 8 percent in the third year. What would be the third year future value?

What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?

Which is more valuable,receiving $775 today or receiving $885 in 2.5 years if interest rates are 7.25 percent?

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

Ten years ago,Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now).Aidan can make a 20-year investment today and lock in an 8 percent rate.How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $5,500.What return did you earn? What return would you suffer next year for your investment to be valued at the original $5,000?

If an average home in your town currently costs $300,000,and house prices are expected to grow at an average rate of 5 percent per year,what will an average house cost in 10 years?

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

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

You invested $2,000 in the stock market one year ago.Today,the investment is valued at $9,500.What return did you earn? What return would you need to suffer next year for your investment to be valued at the original $2,000?

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

A stock investor deposited $3,450 six years ago.Today the account is valued at $2,180.What annual rate of return has this investor earned?

You have $50,000 in your account.Assuming no additional deposits are made and your account earns 8 percent per year,how long will it take for the account to have a balance of $500,000?

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4,and increase to 6 percent in the remaining years?

How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

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

If an average home in your town currently costs $350,000,and house prices are expected to grow at an average rate of 3 percent per year,what will an average house cost in "5" years?

What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?

The process of figuring out how much an amount that you expect to receive in the future is worth today is called

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?

A deposit of $500 earns the following interest rates? 5 percent in the first year, 6 percent in the second year,and 8 percent in the third year. What would be the third year future value?

What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?

Which is more valuable,receiving $775 today or receiving $885 in 2.5 years if interest rates are 7.25 percent?

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

Ten years ago,Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now).Aidan can make a 20-year investment today and lock in an 8 percent rate.How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $5,500.What return did you earn? What return would you suffer next year for your investment to be valued at the original $5,000?

If an average home in your town currently costs $300,000,and house prices are expected to grow at an average rate of 5 percent per year,what will an average house cost in 10 years?

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

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

You invested $2,000 in the stock market one year ago.Today,the investment is valued at $9,500.What return did you earn? What return would you need to suffer next year for your investment to be valued at the original $2,000?

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