Question 1

Francisco d'Anconia is considering an investment opportunity that costs $10,000 today and will pay $11,500 in two years.The IRR of this opportunity is closest to:

Accepted Answer

A) 7.25% 
B) 7.50% 
C) 10.00% 
D) 15.00% 
A) 7.25% 
B) 7.50% 
C) 10.00% 
D) 15.00% A

Question 2

At an annual interest rate of 7%,the future value of this timeline in year 2 is closest to:

Accepted Answer

A) $3080 
B) $3525 
C) $3770 
D) $4035 
A) $3080 
B) $3525 
C) $3770 
D) $4035 B

Question 3

How do you calculate (mathematically)the present value of a(n):
(a)perpetuity
(b)annuity
(c)growing perpetuity
(d)growing annuity

Accepted Answer

(a)PV of a perpetuity =   (b)PV of an annuity = C ×     (c)PV of a growing perpetuity =   (d)PV of a growing annuity = C ×

Question 4

Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their child's college education.They decide to make deposits into an educational savings account on each of their daughter's birthdays,starting with her first birthday.Assume that the educational savings account will return a constant 7%.The parents deposit $2000 on their daughter's first birthday and plan to increase the size of their deposits by 5% each year.Draw a timeline that details the amount that would be available for the daughter's college expenses on her 18th birthday.

Accepted Answer

The answer of Suppose that a young couple has just...

Question 5

The British government has a consol bond outstanding that pays ₤100 in interest each year.Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now,then the value of the consol bond is closest to:

Accepted Answer

A) ₤1000 
B) ₤1100 
C) ₤2100 
D) ₤2000 
A) ₤1000 
B) ₤1100 
C) ₤2100 
D) ₤2000

Question 6

Consider the following timeline detailing a stream of cash flows:   If the current market rate of interest is 8%,then the present value of this stream of cash flows is closest to:

Accepted Answer

A) $22,871 
B) $21,211 
C) $24,074 
D) $26,000 
A) $22,871 
B) $21,211 
C) $24,074 
D) $26,000

Question 7

Consider the following timeline:   If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

Accepted Answer

A) $1720 
B) $1500 
C) $1404 
D) $1717 
A) $1720 
B) $1500 
C) $1404 
D) $1717

Question 8

The amount of money that your great aunt Matilda originally put in the account is closest to:

Accepted Answer

A) $600 
B) $800 
C) $1000 
D) $1200 
A) $600 
B) $800 
C) $1000 
D) $1200

Question 9

You are saving for retirement.To live comfortably,you decide that you will need $2.5 million dollars by the time you are 65.If today is your 30th birthday,and you decide,starting today,and on every birthday up to and including your 65th birthday,that you will deposit the same amount into your savings account.Assuming the interest rate is 5%,the amount that you must set aside each year on your birthday is closest to:

Accepted Answer

A) $71,430 
B) $27,680 
C) $26,100 
D) $26,260 
A) $71,430 
B) $27,680 
C) $26,100 
D) $26,260

Question 10

Which of the following formulas is INCORRECT?

Accepted Answer

A) PV of a growing annuity = C ×  
  
B) PV of an annuity = C ×  
  
C) PV of a growing perpetuity =   
D) PV of a perpetuity =   
A) PV of a growing annuity = C ×  
  
B) PV of an annuity = C ×  
  
C) PV of a growing perpetuity =   
D) PV of a perpetuity =

Question 11

You are considering purchasing a new home.You will need to borrow $250,000 to purchase the home.A mortgage company offers you a 15 year fixed rate mortgage (180 months)at 9% APR (0.75% month).If you borrow the money from this mortgage company,your monthly mortgage payment will be closest to:

Accepted Answer

A) $2585 
B) $660 
C) $2535 
D) $1390 
A) $2585 
B) $660 
C) $2535 
D) $1390

Question 12

If the appropriate interest rate is 10%,then the NPV of this opportunity is closest to:

Accepted Answer

A) ($88,000) 
B) $88,000 
C) $300,000 
D) $1,300,000 
A) ($88,000) 
B) $88,000 
C) $300,000 
D) $1,300,000

Question 13

If the current rate of interest is 8%,then the present value of an investment that pays $1000 per year and lasts 20 years is closest to:

Accepted Answer

A) $18,519 
B) $45,761 
C) $9818 
D) $20,000 
A) $18,519 
B) $45,761 
C) $9818 
D) $20,000

Question 14

Draw a timeline detailing Joe's cash flows from the sale of the family business.

Accepted Answer

The answer of Draw a timeline detailing Joe's cash flows...

Question 15

Suppose that you are considering an investment that will pay you $4000 per year for the next five years.The appropriate rate of interest is 5%.You want to know the present value of the cash flows from this investment.To solve this problem in Microsoft Excel,you would use which of the following excel formulas?

Accepted Answer

A) =PV(.05,5,4000,0,0) 
B) =PV(.05,5,4000,0,1) 
C) =PV(5,.05,4000,0) 
D) =PV(5,5,4000,0) 
A) =PV(.05,5,4000,0,0) 
B) =PV(.05,5,4000,0,1) 
C) =PV(5,.05,4000,0) 
D) =PV(5,5,4000,0)

Question 16

The future value at retirement (age 65)of your savings is:

Accepted Answer

First deposit = .08

Question 17

Use the figure for the question(s)below.  
-Which of the following statements regarding the timeline is FALSE?

Accepted Answer

A) Date 1 is one year from now. 
B) The $5000 below date 1 is the payment you will receive at the end of the first year. 
C) The $5000 below date 2 is the payment you will receive at the beginning of the second year. 
D) Date 0 represents today. 
A) Date 1 is one year from now. 
B) The $5000 below date 1 is the payment you will receive at the end of the first year. 
C) The $5000 below date 2 is the payment you will receive at the beginning of the second year. 
D) Date 0 represents today.

Question 18

Suppose that you deposit $10,000 in an account that pays 6% interest and you want to know how much will be in your account at the end of 10 years.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

Accepted Answer

A) =FV(.06,10000,0,10) 
B) =PV(.06,10000,0,10) 
C) =FV(.06,10,0,10000) 
D) =PV(.06,10,0,10000) 
A) =FV(.06,10000,0,10) 
B) =PV(.06,10000,0,10) 
C) =FV(.06,10,0,10000) 
D) =PV(.06,10,0,10000)

Question 19

The present value (at age 30)of your retirement savings is closest to:

Accepted Answer

A) $87,000 
B) $108,000 
C) $46,600 
D) $75,230 
A) $87,000 
B) $108,000 
C) $46,600 
D) $75,230

Question 20

At an annual interest rate of 7%,the future value of $5000 in five years is closest to:

Accepted Answer

A) $3565 
B) $6750 
C) $7015 
D) $7035 
A) $3565 
B) $6750 
C) $7015 
D) $7035

Francisco d'Anconia is considering an investment opportunity that costs $10,000 today and will pay $11,500 in two years.The IRR of this opportunity is closest to:

At an annual interest rate of 7%,the future value of this timeline in year 2 is closest to:

How do you calculate (mathematically)the present value of a(n): (a)perpetuity (b)annuity (c)growing perpetuity (d)growing annuity

The British government has a consol bond outstanding that pays ₤100 in interest each year.Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now,then the value of the consol bond is closest to:

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%,then the present value of this stream of cash flows is closest to:

Consider the following timeline: If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

The amount of money that your great aunt Matilda originally put in the account is closest to:

Which of the following formulas is INCORRECT?

You are considering purchasing a new home.You will need to borrow $250,000 to purchase the home.A mortgage company offers you a 15 year fixed rate mortgage (180 months)at 9% APR (0.75% month).If you borrow the money from this mortgage company,your monthly mortgage payment will be closest to:

If the appropriate interest rate is 10%,then the NPV of this opportunity is closest to:

If the current rate of interest is 8%,then the present value of an investment that pays $1000 per year and lasts 20 years is closest to:

Draw a timeline detailing Joe's cash flows from the sale of the family business.

The future value at retirement (age 65)of your savings is:

Use the figure for the question(s)below. -Which of the following statements regarding the timeline is FALSE?

Suppose that you deposit $10,000 in an account that pays 6% interest and you want to know how much will be in your account at the end of 10 years.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

The present value (at age 30)of your retirement savings is closest to:

At an annual interest rate of 7%,the future value of $5000 in five years is closest to:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Filters

Exam 4: The Time Value of Money

Francisco d'Anconia is considering an investment opportunity that costs $10,000 today and will pay $11,500 in two years.The IRR of this opportunity is closest to:

At an annual interest rate of 7%,the future value of this timeline in year 2 is closest to:

How do you calculate (mathematically)the present value of a(n): (a)perpetuity (b)annuity (c)growing perpetuity (d)growing annuity

The British government has a consol bond outstanding that pays ₤100 in interest each year.Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now,then the value of the consol bond is closest to:

Consider the following timeline detailing a stream of cash flows: If the current market rate of interest is 8%,then the present value of this stream of cash flows is closest to:

Consider the following timeline: If the current market rate of interest is 7%,then the future value of this timeline as of year 3 is closest to:

The amount of money that your great aunt Matilda originally put in the account is closest to:

Which of the following formulas is INCORRECT?

You are considering purchasing a new home.You will need to borrow $250,000 to purchase the home.A mortgage company offers you a 15 year fixed rate mortgage (180 months)at 9% APR (0.75% month).If you borrow the money from this mortgage company,your monthly mortgage payment will be closest to:

If the appropriate interest rate is 10%,then the NPV of this opportunity is closest to:

If the current rate of interest is 8%,then the present value of an investment that pays $1000 per year and lasts 20 years is closest to:

Draw a timeline detailing Joe's cash flows from the sale of the family business.

The future value at retirement (age 65)of your savings is:

Use the figure for the question(s)below. -Which of the following statements regarding the timeline is FALSE?

Suppose that you deposit $10,000 in an account that pays 6% interest and you want to know how much will be in your account at the end of 10 years.To solve this problem in Microsoft Excel,you would use which of the following Excel formulas?

The present value (at age 30)of your retirement savings is closest to:

At an annual interest rate of 7%,the future value of $5000 in five years is closest to:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Filters