Question 1

The present value of an ordinary annuity of $350 each year for five years,assuming an opportunity cost of 4 percent,is ________.

Accepted Answer

A) $1,620 
B) $1,896 
C) $1,971 
D) $1,558 
A) $1,620 
B) $1,896 
C) $1,971 
D) $1,558

Question 2

In comparing an ordinary annuity and an annuity due,which of the following is TRUE?

Accepted Answer

A) The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. 
B) The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due. 
C) The present value of an annuity due is always less than the future value of an otherwise identical ordinary annuity,since one less payment is received with an annuity due. 
D) All things being equal,one would prefer to receive an ordinary annuity compared to an annuity due. 
A) The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. 
B) The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due. 
C) The present value of an annuity due is always less than the future value of an otherwise identical ordinary annuity,since one less payment is received with an annuity due. 
D) All things being equal,one would prefer to receive an ordinary annuity compared to an annuity due.

Question 3

Carlos is the new assistant branch manager of a larger Florida-based bank and the branch manager has asked him a question to test his knowledge.The question is which rate should the bank advertise on monthly-compounded loans,the nominal annual percentage rate or the effective annual percentage rate? Which rate should the bank advertise on quarterly-compounded savings accounts? Explain.As a consumer,which would you prefer to see and why?

Accepted Answer

A bank would rather advertise the annual

Question 4

The effective rate of interest is the contractual rate of interest charged by a lender or promised by a borrower.

Accepted Answer

A) True 
 B)False

Question 5

The greater the interest rate and the longer the period of time,the higher the present value.

Accepted Answer

A) True 
 B)False

The present value of an ordinary annuity of $350 each year for five years,assuming an opportunity cost of 4 percent,is ________.

In comparing an ordinary annuity and an annuity due,which of the following is TRUE?

The effective rate of interest is the contractual rate of interest charged by a lender or promised by a borrower.

The greater the interest rate and the longer the period of time,the higher the present value.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Long- and Short-Term 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

The present value of an ordinary annuity of $350 each year for five years,assuming an opportunity cost of 4 percent,is ________.

In comparing an ordinary annuity and an annuity due,which of the following is TRUE?

The effective rate of interest is the contractual rate of interest charged by a lender or promised by a borrower.

The greater the interest rate and the longer the period of time,the higher the present value.

The Role of Managerial Finance

The Financial Market Environment

Financial Statements and Ratio Analysis

Long- and Short-Term 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