Question 1

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

Accepted Answer

A)  $478.11 
B)  $980.00 
C)  $1,024.87 
D)  $1,364.10 
A)  $478.11 
B)  $980.00 
C)  $1,024.87 
D)  $1,364.10

Question 2

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 3

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year.

Accepted Answer

A)  0.89 percent 
B)  1.12 percent 
C)  12.00 percent 
D)  89.00 percent 
A)  0.89 percent 
B)  1.12 percent 
C)  12.00 percent 
D)  89.00 percent

Question 4

At age 20 you invest $1,000 that earns 7 percent each year.At age 30 you invest $1,000 that earns 10 percent per year.In which case would you have more money at age 60?

Accepted Answer

A)  At age 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 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 20 invest $1,000 at 7 percent. 
B)  At age 30 invest $1,000 at 10 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 5

A $400 investment has doubled to $800 in six years because of a 12.25 percent return.How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

Accepted Answer

A)  2.56 years 
B)  2.76 years 
C)  3.46 years 
D)  5 years 
A)  2.56 years 
B)  2.76 years 
C)  3.46 years 
D)  5 years

Question 6

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?

Accepted Answer

A)  $771.07 
B)  $819.00 
C)  $823.90 
D)  $1519.00 
A)  $771.07 
B)  $819.00 
C)  $823.90 
D)  $1519.00

Question 7

If an average home in your town currently costs $250,000,and house prices are expected to grow at an average rate of 3 percent per year,what will a house cost in eight years?

Accepted Answer

A)  $255,033.41 
B)  $255,043.97 
C)  $314,928.01 
D)  $316,692.52 
A)  $255,033.41 
B)  $255,043.97 
C)  $314,928.01 
D)  $316,692.52

Question 8

You want to retire in 25 years and you have just inherited $300,000.You believe you will need $1,450,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

Accepted Answer

A)  4.5 percent 
B)  5.5 percent 
C)  6.5 percent 
D)  8.5 percent 
A)  4.5 percent 
B)  5.5 percent 
C)  6.5 percent 
D)  8.5 percent

Question 9

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 10

Consider a $2,000 deposit earning 6 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)  $60.00 
B)  $76.45 
C)  $600.00 
D)  $676.45 
A)  $60.00 
B)  $76.45 
C)  $600.00 
D)  $676.45

Question 11

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

Accepted Answer

A)  $498.61 
B)  $525.87 
C)  $555.56 
D)  $575.09 
A)  $498.61 
B)  $525.87 
C)  $555.56 
D)  $575.09

Question 12

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 13

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

Accepted Answer

A)  0.77 percent 
B)  1.30 percent 
C)  30.0 percent 
D)  77.0 percent 
A)  0.77 percent 
B)  1.30 percent 
C)  30.0 percent 
D)  77.0 percent

Question 14

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to double again if it earns 14 percent per year?

Accepted Answer

A)  4.92 years 
B)  5.29 years 
C)  6.62 years 
D)  8.22 years 
A)  4.92 years 
B)  5.29 years 
C)  6.62 years 
D)  8.22 years

Question 15

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually?

Accepted Answer

A)  $792.90 
B)  $803.61 
C)  $899.23 
D)  $910.84 
A)  $792.90 
B)  $803.61 
C)  $899.23 
D)  $910.84

Question 16

Ten years ago,Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now).James can make a 20-year investment today and lock in a 6 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)  $673.75 
B)  $1,206.59 
C)  $1,967.15 
D)  $2,373.54 
A)  $673.75 
B)  $1,206.59 
C)  $1,967.15 
D)  $2,373.54

Question 17

What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year 6?

Accepted Answer

A)  6.99 percent 
B)  14.47 percent 
C)  24.00 percent 
D)  50.00 percent 
A)  6.99 percent 
B)  14.47 percent 
C)  24.00 percent 
D)  50.00 percent

Question 18

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

Question 19

Time value of money concepts can be used by

Accepted Answer

A)  individuals doing personal financial planning. 
B)  CFOs and CEOs to make business decisions. 
C)  investors calculating a return on an investment. 
D)  All of these choices are correct. 
A)  individuals doing personal financial planning. 
B)  CFOs and CEOs to make business decisions. 
C)  investors calculating a return on an investment. 
D)  All of these choices are correct.

Question 20

A $7 million deposit earns 5 percent for nine years.If the account loses 2 percent per year after that,how long will it take to be reduced back to $7 million?

Accepted Answer

A)  6.78 years 
B)  10.29 years 
C)  11.29 years 
D)  21.74 years 
A)  6.78 years 
B)  10.29 years 
C)  11.29 years 
D)  21.74 years

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

How are present values affected by changes in interest rates?

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year.

At age 20 you invest $1,000 that earns 7 percent each year.At age 30 you invest $1,000 that earns 10 percent per year.In which case would you have more money at age 60?

A $400 investment has doubled to $800 in six years because of a 12.25 percent return.How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?

If an average home in your town currently costs $250,000,and house prices are expected to grow at an average rate of 3 percent per year,what will a house cost in eight years?

You want to retire in 25 years and you have just inherited $300,000.You believe you will need $1,450,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

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?

Consider a $2,000 deposit earning 6 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

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

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to double again if it earns 14 percent per year?

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually?

Ten years ago,Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now).James can make a 20-year investment today and lock in a 6 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year 6?

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

Time value of money concepts can be used by

A $7 million deposit earns 5 percent for nine years.If the account loses 2 percent per year after that,how long will it take to be reduced back to $7 million?

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

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

How are present values affected by changes in interest rates?

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year.

At age 20 you invest $1,000 that earns 7 percent each year.At age 30 you invest $1,000 that earns 10 percent per year.In which case would you have more money at age 60?

A $400 investment has doubled to $800 in six years because of a 12.25 percent return.How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?

If an average home in your town currently costs $250,000,and house prices are expected to grow at an average rate of 3 percent per year,what will a house cost in eight years?

You want to retire in 25 years and you have just inherited $300,000.You believe you will need $1,450,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

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?

Consider a $2,000 deposit earning 6 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest)?

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

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

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to double again if it earns 14 percent per year?

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually?

Ten years ago,Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now).James can make a 20-year investment today and lock in a 6 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year 6?

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

Time value of money concepts can be used by

A $7 million deposit earns 5 percent for nine years.If the account loses 2 percent per year after that,how long will it take to be reduced back to $7 million?

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