Question 1

As the number of compounding periods increases,the ________ increases.

Accepted Answer

A) quoted 
B) annual percentage yield 
C) effective annual rate 
D) both B and C 
A) quoted 
B) annual percentage yield 
C) effective annual rate 
D) both B and C D

Question 2

The effective annual rate increases when the ________ increases.

Accepted Answer

A) number of compounding periods in a year 
B) number of years invested 
C) quoted rate 
D) both A and C 
E) all of the above 
A) number of compounding periods in a year 
B) number of years invested 
C) quoted rate 
D) both A and C 
E) all of the above D

Question 3

If you purchased a share of Mico.com stock on March 1,1993 for $45 and you sold the stock at $168 on February 28,1998,what was your annual rate of return on the stock?

Accepted Answer

A) 83% 
B) 75% 
C) 20% 
D) 30% 
E) 50% 
A) 83% 
B) 75% 
C) 20% 
D) 30% 
E) 50% D

Question 4

Shorty Jones wants to buy a one-way bus ticket to Mule-Snort,Pennsylvania.The ticket costs $142,but Mr.Jones has only $80.If Shorty puts the money in an account that pays 9% interest compounded monthly,how many months must Shorty wait until he has $142 (round to the nearest month)?

Accepted Answer

A) 73 months 
B) 75 months 
C) 77 months 
D) 79 months 
A) 73 months 
B) 75 months 
C) 77 months 
D) 79 months

Question 5

You bought a painting 10 years ago as an investment.You originally paid $85,000 for it.If you sold it for $484,050,what was your annual return on investment?

Accepted Answer

A) 47% 
B) 4.7% 
C) 19% 
D) 12.8% 
A) 47% 
B) 4.7% 
C) 19% 
D) 12.8%

Question 6

Bobby's grandmother deposited $100 in a savings account for him when he was born.The money has been earning an annual rate of 12% interest,compounded quarterly for the last 25 years.He is getting married and would like to take his new bride on a fabulous honeymoon.How much does he have in this account to use?

Accepted Answer

A) $4,165 
B) $1,700 
C) $5,051 
D) $1,922 
A) $4,165 
B) $1,700 
C) $5,051 
D) $1,922

Question 7

The present value of the future sum of money is inversely related to both the number of years until payment is received and the opportunity rate.

Accepted Answer

A) True 
 B)False

Question 8

The more frequent the compounding periods in a year,the higher the future value.

Accepted Answer

A) True 
 B)False

Question 9

You are considering two investments.Investment A yields 10% compounded quarterly.Investment B yields r% compounded semiannually.Both investments have equal annual yields.Find r.

Accepted Answer

A) 19.875% 
B) 10% 
C) 10.38% 
D) 10.125% 
A) 19.875% 
B) 10% 
C) 10.38% 
D) 10.125%

Question 10

Middletown,USA currently has a population of 1.5 million people.It has been one of the fastest growing cities in the nation,growing by an average of 4% per year for the last five years.If this city's population continues to grow at 4% per year,what will the population be 10 years from now?

Accepted Answer

A) 1,560,000 
B) 2,220,366 
C) 2,100,000 
D) 1,824,979 
A) 1,560,000 
B) 2,220,366 
C) 2,100,000 
D) 1,824,979

Question 11

The same basic formula is used for computing both the computation of future value and of present value.

Accepted Answer

A) True 
 B)False

Question 12

What is the present value of $12,500 to be received 10 years from today? Assume a discount rate of 8% compounded annually and round to the nearest $10.

Accepted Answer

A) $5,790 
B) $11,574 
C) $9,210 
D) $17,010 
A) $5,790 
B) $11,574 
C) $9,210 
D) $17,010

Question 13

Which of the following statements is true about the time value of money?

Accepted Answer

A) The present value of a future amount will be greater if funds earn 5% instead of 10%. 
B) The present value of a single sum will be unaffected by the rate of return at which funds grow. 
C) The present value of a future amount will be greater if funds earn 12% instead of 6%. 
D) The present value of a future amount will be unaffected by how far in the future funds would be received. 
A) The present value of a future amount will be greater if funds earn 5% instead of 10%. 
B) The present value of a single sum will be unaffected by the rate of return at which funds grow. 
C) The present value of a future amount will be greater if funds earn 12% instead of 6%. 
D) The present value of a future amount will be unaffected by how far in the future funds would be received.

Question 14

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly,what will the investment be worth in 21 months (round to the nearest dollar)?

Accepted Answer

A) $827 
B) $833 
C) $828 
D) $1,176 
A) $827 
B) $833 
C) $828 
D) $1,176

Question 15

Earnings per share for XYZ,Inc.grew constantly from $7.99 in 1974 to $12.68 in 1980.What was the compound annual growth rate in earnings-per-share over the period?

Accepted Answer

$12.68 = $7.99 FVIF[

Question 16

You deposit $5,000 today in an account drawing 12% compounded quarterly.How much will you have in the account at the end of 2 1/2 years?

Accepted Answer

A) $7,401 
B) $5,523 
C) $7,128 
D) $6,720 
A) $7,401 
B) $5,523 
C) $7,128 
D) $6,720

Question 17

Which of the following provides the greatest annual interest?

Accepted Answer

A) 10%,compounded annually 
B) 10%,compounded semiannually 
C) 10%,compounded quarterly 
D) 10%,compounded monthly 
E) 10%,compounded daily 
A) 10%,compounded annually 
B) 10%,compounded semiannually 
C) 10%,compounded quarterly 
D) 10%,compounded monthly 
E) 10%,compounded daily

Question 18

When George Washington was president of the United States in 1797,his salary was $25,000.If you assume an annual rate of inflation of 2.5%,how much would his salary have been in 1997?

Accepted Answer

A) $1,025,000 
B) $954,719 
C) $2,525,548 
D) $4,085,920 
E) $3,489,097 
A) $1,025,000 
B) $954,719 
C) $2,525,548 
D) $4,085,920 
E) $3,489,097

Question 19

A bank pays a quoted annual (nominal)interest rate of 4.25%,compounded daily (365-day year).What is the annual percentage yield (APY)?

Accepted Answer

A) 4.25% 
B) 5.56% 
C) 4.75% 
D) 6.20% 
E) 4.34% 
A) 4.25% 
B) 5.56% 
C) 4.75% 
D) 6.20% 
E) 4.34%

Question 20

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Accepted Answer

A) $1,048 
B) $1,010 
C) $1,038 
D) $808 
A) $1,048 
B) $1,010 
C) $1,038 
D) $808

As the number of compounding periods increases,the ________ increases.

The effective annual rate increases when the ________ increases.

If you purchased a share of Mico.com stock on March 1,1993 for $45 and you sold the stock at $168 on February 28,1998,what was your annual rate of return on the stock?

Shorty Jones wants to buy a one-way bus ticket to Mule-Snort,Pennsylvania.The ticket costs $142,but Mr.Jones has only $80.If Shorty puts the money in an account that pays 9% interest compounded monthly,how many months must Shorty wait until he has $142 (round to the nearest month)?

You bought a painting 10 years ago as an investment.You originally paid $85,000 for it.If you sold it for $484,050,what was your annual return on investment?

The present value of the future sum of money is inversely related to both the number of years until payment is received and the opportunity rate.

The more frequent the compounding periods in a year,the higher the future value.

You are considering two investments.Investment A yields 10% compounded quarterly.Investment B yields r% compounded semiannually.Both investments have equal annual yields.Find r.

Middletown,USA currently has a population of 1.5 million people.It has been one of the fastest growing cities in the nation,growing by an average of 4% per year for the last five years.If this city's population continues to grow at 4% per year,what will the population be 10 years from now?

The same basic formula is used for computing both the computation of future value and of present value.

What is the present value of $12,500 to be received 10 years from today? Assume a discount rate of 8% compounded annually and round to the nearest $10.

Which of the following statements is true about the time value of money?

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly,what will the investment be worth in 21 months (round to the nearest dollar)?

Earnings per share for XYZ,Inc.grew constantly from $7.99 in 1974 to $12.68 in 1980.What was the compound annual growth rate in earnings-per-share over the period?

You deposit $5,000 today in an account drawing 12% compounded quarterly.How much will you have in the account at the end of 2 1/2 years?

Which of the following provides the greatest annual interest?

When George Washington was president of the United States in 1797,his salary was $25,000.If you assume an annual rate of inflation of 2.5%,how much would his salary have been in 1997?

A bank pays a quoted annual (nominal)interest rate of 4.25%,compounded daily (365-day year).What is the annual percentage yield (APY)?

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 5: Time Value of Money-The Basics

As the number of compounding periods increases,the ________ increases.

The effective annual rate increases when the ________ increases.

If you purchased a share of Mico.com stock on March 1,1993 for $45 and you sold the stock at $168 on February 28,1998,what was your annual rate of return on the stock?

Shorty Jones wants to buy a one-way bus ticket to Mule-Snort,Pennsylvania.The ticket costs $142,but Mr.Jones has only $80.If Shorty puts the money in an account that pays 9% interest compounded monthly,how many months must Shorty wait until he has $142 (round to the nearest month)?

You bought a painting 10 years ago as an investment.You originally paid $85,000 for it.If you sold it for $484,050,what was your annual return on investment?

The present value of the future sum of money is inversely related to both the number of years until payment is received and the opportunity rate.

The more frequent the compounding periods in a year,the higher the future value.

You are considering two investments.Investment A yields 10% compounded quarterly.Investment B yields r% compounded semiannually.Both investments have equal annual yields.Find r.

Middletown,USA currently has a population of 1.5 million people.It has been one of the fastest growing cities in the nation,growing by an average of 4% per year for the last five years.If this city's population continues to grow at 4% per year,what will the population be 10 years from now?

The same basic formula is used for computing both the computation of future value and of present value.

What is the present value of $12,500 to be received 10 years from today? Assume a discount rate of 8% compounded annually and round to the nearest $10.

Which of the following statements is true about the time value of money?

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly,what will the investment be worth in 21 months (round to the nearest dollar)?

Earnings per share for XYZ,Inc.grew constantly from $7.99 in 1974 to $12.68 in 1980.What was the compound annual growth rate in earnings-per-share over the period?

You deposit $5,000 today in an account drawing 12% compounded quarterly.How much will you have in the account at the end of 2 1/2 years?

Which of the following provides the greatest annual interest?

When George Washington was president of the United States in 1797,his salary was $25,000.If you assume an annual rate of inflation of 2.5%,how much would his salary have been in 1997?

A bank pays a quoted annual (nominal)interest rate of 4.25%,compounded daily (365-day year).What is the annual percentage yield (APY)?

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters