Exam 7: Accounting and the Time Value of Money

Which of the following is false?

Annie Laerz wants to invest $10,000 on January 1,2014,so that she may withdraw 10 annual payments of equal amounts beginning January 1,2029.If the fund earns 10% annual interest over its life,what will be the amount of each of the withdrawals?

You decide to deposit $2,000 at a local bank for two years at a 7% rate of interest compounded annually.What is the future value of your investment?

Interest calculated on the original principal regardless of the amount of interest that has been paid or accrued in the past is ________.

List the variables in a single-sum problem.

At the beginning of 2017,Denero Company issued 10-year bonds with a face value of $4,000,000 due on December 31,2027.The company will accumulate a fund to retire these bonds at maturity.It will make ten annual deposits to the fund beginning on December 31,2017.How much must Denero deposit each year to achieve this investment goal,assuming that it will earn 12% interest compounded annually?

Cocopedia Inc.is planning to issue bonds that will pay 6% semiannual interest and mature in 10 years. a.How much will investors be willing to pay for a $1,000 bond if the prevailing market yield rate is 4%? b.How much will investors be willing to pay for a $1,000 bond if the prevailing market interest rate is 8%?

A deferred annuity is an annuity for which the first payment is delayed until a future period.

Balance sheet values are calculated using compound interest (present value)calculations for all of the following except ________.

$10,000 is put in a investment account today.The investment account compounds interest at a rate of 1% per month.What amount will be available five years from today?

In the present value of an annuity table,the factors ________.

Dana Zorowski has recently started her accounting career and her 25th birthday is coming soon.She has been told that now is the ideal time to begin to prepare for retirement.She has determined that she would like to retire with a pension that will pay $50,000 per year in retirement benefits after she retires with the expectation that the retirement fund should last for 20 years.To meet her pension retirement benefit goals,how much should she deposit annually for the next 40 years in a retirement investment fund that earns 8%? Assume all retirement deposits and benefit payments occur at the end of each year.

You have just won the Multi-State Lottery Jackpot of $500,000,000! You have the option of receiving a check for $25,000,000 every year at the end of the next 20 years.The lottery commission also allows you the option of receiving a one-time payment of $311,555,000 when you turn in the winning ticket.What is the approximate interest rate that the lottery commission is using to determine the one-time payment?

The PV (present value)function in a Microsoft Excel spreadsheet requires inputting all of the following variables except ________.

The length of a period is determined by the frequency of interest compounding.

The risk free rate of return is equal to the prime rate plus the expected inflation rate.

Henry Rector deposited $5,000 in a certificate of deposit that provides interest of 10% compounded quarterly if the amount is maintained for 5 years.How much will Henry have at the end of 5 years?

Zendor Company wants to have $200,000 available in August 2021 to make an equipment purchase.To be able to have this amount available,Zendor will make equal annual deposits in an investment account earning 12% annually in June 2017,2018,2019,2020,and 2021.What is the dollar amount that must be deposited each of those years to achieve this objective?

Determining the present value of one or more future amounts is known as ________.

A future value is always less than the corresponding present value.