Question 1

The present value of a single future sum

Accepted Answer

A) increases as the number of discount periods increases. 
B) is generally larger than the future sum. 
C) depends upon the number of discount periods. 
D) increases as the discount rate increases. 
A) increases as the number of discount periods increases. 
B) is generally larger than the future sum. 
C) depends upon the number of discount periods. 
D) increases as the discount rate increases. C

Question 2

If you deposit $1,000 each year in a savings account earning 4%,compounded annually,how much will you have in 10 years?

Accepted Answer

FV[10] = $1,000(12.006)= $12,006

Question 3

Money has a greater time value time value

Accepted Answer

A) when rates of return are higher. 
B) when rates of return are lower. 
C) when the future is uncertain. 
D) when investors are willing to assume greater risks. 
A) when rates of return are higher. 
B) when rates of return are lower. 
C) when the future is uncertain. 
D) when investors are willing to assume greater risks. A

Question 4

At 8% compounded annually,how long will it take $750 to double?

Accepted Answer

A) 6.5 years 
B) 48 months 
C) 9 years 
D) 12 years 
A) 6.5 years 
B) 48 months 
C) 9 years 
D) 12 years

Question 5

If you want to have $1,200 in 27 months,how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).

Accepted Answer

A) $910 
B) $890 
C) $880 
D) $860 
A) $910 
B) $890 
C) $880 
D) $860

Question 6

If you want to have $10,000 in 10 years,which of the following formulas represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.

Accepted Answer

A) 10,000/(1 + .05)10 
B) 10,000/(1 + .005)120 
C) 10,000/(1 + .06)10 
D) 10,000/(1 + .006)120 
A) 10,000/(1 + .05)10 
B) 10,000/(1 + .005)120 
C) 10,000/(1 + .06)10 
D) 10,000/(1 + .006)120

Question 7

As the discount rate increases,the present value of future cash flows increases.

Accepted Answer

A) True 
 B)False

Question 8

If you want to have $1,700 in seven years,how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10).

Accepted Answer

A) $1,120 
B) $1,130 
C) $1,110 
D) $1,140 
A) $1,120 
B) $1,130 
C) $1,110 
D) $1,140

Question 9

High discount rates favor

Accepted Answer

A) neither long-term nor short-term investments. 
B) both long-term and short-term investments. 
C) long-term investments. 
D) short-term investments. 
A) neither long-term nor short-term investments. 
B) both long-term and short-term investments. 
C) long-term investments. 
D) short-term investments.

Question 10

How much money must be put into a bank account yielding 5.5% (compounded annually)in order to have $250 at the end of five years (round to nearest $1)?

Accepted Answer

A) $237 
B) $191 
C) $187 
D) $179 
A) $237 
B) $191 
C) $187 
D) $179

Question 11

The present value of a future sum of money increases as the number of years before the payment is received increases.

Accepted Answer

A) True 
 B)False

Question 12

What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1).

Accepted Answer

A) $893 
B) $3,106 
C) $429 
D) $833 
A) $893 
B) $3,106 
C) $429 
D) $833

Question 13

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 14

For any number of compounding periods per year greater than 1,EAR will always be greater than the APR.

Accepted Answer

A) True 
 B)False

Question 15

The present value of a single sum

Accepted Answer

A) increases as the discount rate decreases. 
B) decreases as the discount rate decreases. 
C) increases as the number of discount periods increases. 
D) increases as the discount rate increases. 
E) none of the above. 
A) increases as the discount rate decreases. 
B) decreases as the discount rate decreases. 
C) increases as the number of discount periods increases. 
D) increases as the discount rate increases. 
E) none of the above.

Question 16

Sketch a timeline that represents an immediate investment of $20,000 with $25,000 to be received at the end of 4 years.

Accepted Answer

_0__________1_______

Question 17

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

Question 18

If you place $50 in a savings account with an interest rate of 7% compounded weekly,what will the investment be worth at the end of five years (round to the nearest dollar)?

Accepted Answer

A) $72 
B) $70 
C) $71 
D) $57 
A) $72 
B) $70 
C) $71 
D) $57

Question 19

The time value of money is created by

Accepted Answer

A) the existence of profitable investment alternatives and interest rates. 
B) the fact that the passing of time increases the value of money. 
C) the elimination of the opportunity cost as a consideration. 
D) the fact that the value of saving money for tomorrow could be more or less than spending it today. 
A) the existence of profitable investment alternatives and interest rates. 
B) the fact that the passing of time increases the value of money. 
C) the elimination of the opportunity cost as a consideration. 
D) the fact that the value of saving money for tomorrow could be more or less than spending it today.

Question 20

A friend plans to buy a big-screen TV/entertainment system and can afford to set aside $1,320 toward the purchase today.If your friend can earn 5.0%,compounded yearly,how much can your friend spend in four years on the purchase? Round off to the nearest $1.

Accepted Answer

A) $1,444 
B) $1,604 
C) $1,764 
D) $1,283 
A) $1,444 
B) $1,604 
C) $1,764 
D) $1,283

The present value of a single future sum

If you deposit $1,000 each year in a savings account earning 4%,compounded annually,how much will you have in 10 years?

Money has a greater time value time value

At 8% compounded annually,how long will it take $750 to double?

If you want to have $1,200 in 27 months,how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).

If you want to have $10,000 in 10 years,which of the following formulas represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.

As the discount rate increases,the present value of future cash flows increases.

If you want to have $1,700 in seven years,how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10).

High discount rates favor

How much money must be put into a bank account yielding 5.5% (compounded annually)in order to have $250 at the end of five years (round to nearest $1)?

The present value of a future sum of money increases as the number of years before the payment is received increases.

What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1).

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.

For any number of compounding periods per year greater than 1,EAR will always be greater than the APR.

The present value of a single sum

Sketch a timeline that represents an immediate investment of $20,000 with $25,000 to be received at the end of 4 years.

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

If you place $50 in a savings account with an interest rate of 7% compounded weekly,what will the investment be worth at the end of five years (round to the nearest dollar)?

The time value of money is created by

A friend plans to buy a big-screen TV/entertainment system and can afford to set aside $1,320 toward the purchase today.If your friend can earn 5.0%,compounded yearly,how much can your friend spend in four years on the purchase? Round off 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

The present value of a single future sum

If you deposit $1,000 each year in a savings account earning 4%,compounded annually,how much will you have in 10 years?

Money has a greater time value time value

At 8% compounded annually,how long will it take $750 to double?

If you want to have $1,200 in 27 months,how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).

If you want to have $10,000 in 10 years,which of the following formulas represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.

As the discount rate increases,the present value of future cash flows increases.

If you want to have $1,700 in seven years,how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10).

High discount rates favor

How much money must be put into a bank account yielding 5.5% (compounded annually)in order to have $250 at the end of five years (round to nearest $1)?

The present value of a future sum of money increases as the number of years before the payment is received increases.

What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1).

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.

For any number of compounding periods per year greater than 1,EAR will always be greater than the APR.

The present value of a single sum

Sketch a timeline that represents an immediate investment of $20,000 with $25,000 to be received at the end of 4 years.

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

If you place $50 in a savings account with an interest rate of 7% compounded weekly,what will the investment be worth at the end of five years (round to the nearest dollar)?

The time value of money is created by

A friend plans to buy a big-screen TV/entertainment system and can afford to set aside $1,320 toward the purchase today.If your friend can earn 5.0%,compounded yearly,how much can your friend spend in four years on the purchase? Round off 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