Question 1

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 2

On timeline,the present is represented as

Accepted Answer

A) time sub n 
B) time zero 
C) time sub i 
D) time 1 
A) time sub n 
B) time zero 
C) time sub i 
D) time 1

Question 3

Which of the following is the formula for present value?

Accepted Answer

A) FVn = P(1 + i)n 
B) FVn = (1 + i)/P 
C) FVn = P/(1 + i)n 
D) FVn = P(1 + i)-n 
A) FVn = P(1 + i)n 
B) FVn = (1 + i)/P 
C) FVn = P/(1 + i)n 
D) FVn = P(1 + i)-n

Question 4

Financial managers use the time value of money to

Accepted Answer

A) make business decisions. 
B) compare cash flows of different projects. 
C) determine the price of common stock. 
D) both A and B. 
E) all of the above. 
A) make business decisions. 
B) compare cash flows of different projects. 
C) determine the price of common stock. 
D) both A and B. 
E) all of the above.

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) A dollar received one year from now will be worth more than a dollar received today. 
B) On monthly compounding loans,the annual percentage yield will be less than the nominal or quoted rate of interest. 
C) Compounding essentially means earning interest on interest on an initial balance. 
D) Perpetuities pay an equal payment forever. 
A) A dollar received one year from now will be worth more than a dollar received today. 
B) On monthly compounding loans,the annual percentage yield will be less than the nominal or quoted rate of interest. 
C) Compounding essentially means earning interest on interest on an initial balance. 
D) Perpetuities pay an equal payment forever.

Question 6

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

Accepted Answer

A) $100,000 now 
B) $10,000 at the end of each of the next 12 years 
C) The answer depends on the time value of money. 
D) Either alternative is equally valuable. 
A) $100,000 now 
B) $10,000 at the end of each of the next 12 years 
C) The answer depends on the time value of money. 
D) Either alternative is equally valuable.

Question 7

You just purchased a parcel of land for $10,000.If you expect a 12% annual rate of return on your investment,how much will you sell the land for in 10 years?

Accepted Answer

A) $25,000 
B) $31,060 
C) $38,720 
D) $34,310 
A) $25,000 
B) $31,060 
C) $38,720 
D) $34,310

Question 8

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

Accepted Answer

A) True 
 B)False

Question 9

The last amount shown on a timeline represents the future value of all amounts invested up to that point.

Accepted Answer

A) True 
 B)False

Question 10

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

Accepted Answer

A) 51.7% 
B) 6.7% 
C) 10.9% 
D) 6.1% 
A) 51.7% 
B) 6.7% 
C) 10.9% 
D) 6.1%

Question 11

An increase in ________ will decrease present value.

Accepted Answer

A) the discount rate per period 
B) the original amount invested 
C) the number of periods 
D) both A and C 
A) the discount rate per period 
B) the original amount invested 
C) the number of periods 
D) both A and C

Question 12

What is the present value of an investment that pays $400 at the end of three years and $700 at the end of 10 years if the discount rate is 5%?

Accepted Answer

A) $1,100.00 
B) $675.30 
C) $775.40 
D) $424.60 
A) $1,100.00 
B) $675.30 
C) $775.40 
D) $424.60

Question 13

The present value of $400 to be received at the end of 10 years,if the discount rate is 5%,is

Accepted Answer

A) $400.00. 
B) $248.40. 
C) $313.60. 
D) $245.60. 
A) $400.00. 
B) $248.40. 
C) $313.60. 
D) $245.60.

Question 14

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 15

To find the present value of $1000 discounted for 20 years at 8%,when using a financial calculator,the correct entry is

Accepted Answer

A) N=20,i=.08,PMT = 0,FV=1000 solve for PV 
B) N=20,i=8,PMT = 0,FV=1000 solve for PMT 
C) N=20,i=.08,PMT = 0,PV=1000 solve for FV 
D) N=20,i=8,PMT = 0,FV=1000 solve for PV 
A) N=20,i=.08,PMT = 0,FV=1000 solve for PV 
B) N=20,i=8,PMT = 0,FV=1000 solve for PMT 
C) N=20,i=.08,PMT = 0,PV=1000 solve for FV 
D) N=20,i=8,PMT = 0,FV=1000 solve for PV

Question 16

When performing time value of money computations with a financial calculator or EXCEL,PV and FV must have opposite signs.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following provides the greatest annual interest?

Accepted Answer

A) 10% compounded annually 
B) 9.5% compounded monthly 
C) 9% compounded quarterly 
D) 8.5% compounded daily 
A) 10% compounded annually 
B) 9.5% compounded monthly 
C) 9% compounded quarterly 
D) 8.5% compounded daily

Question 18

Which of the following is the formula for compound value?

Accepted Answer

A) FVn = P(1 + i)n 
B) FVn = (1 + i)/P 
C) FVn = P/(1 + i)n 
D) FVn = P(1 + i)-n 
A) FVn = P(1 + i)n 
B) FVn = (1 + i)/P 
C) FVn = P/(1 + i)n 
D) FVn = P(1 + i)-n

Question 19

When using a financial calculator,which of the following is the correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 3% ?

Accepted Answer

A) N=4,i=.03,PV=-200,PMT=0,solve for FV 
B) N=4,i=3,PV=-200,PMT=0,solve for FV 
C) N=4,i=3,PV=0,PMT = $200,solve for FV 
D) N=4,i=3,FV=200,PMT=0,solve for PV 
A) N=4,i=.03,PV=-200,PMT=0,solve for FV 
B) N=4,i=3,PV=-200,PMT=0,solve for FV 
C) N=4,i=3,PV=0,PMT = $200,solve for FV 
D) N=4,i=3,FV=200,PMT=0,solve for PV

Question 20

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

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.

On timeline,the present is represented as

Which of the following is the formula for present value?

Financial managers use the time value of money to

Which of the following statements is FALSE?

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

You just purchased a parcel of land for $10,000.If you expect a 12% annual rate of return on your investment,how much will you sell the land for in 10 years?

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

The last amount shown on a timeline represents the future value of all amounts invested up to that point.

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

An increase in ________ will decrease present value.

What is the present value of an investment that pays $400 at the end of three years and $700 at the end of 10 years if the discount rate is 5%?

The present value of $400 to be received at the end of 10 years,if the discount rate is 5%,is

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?

To find the present value of $1000 discounted for 20 years at 8%,when using a financial calculator,the correct entry is

When performing time value of money computations with a financial calculator or EXCEL,PV and FV must have opposite signs.

Which of the following provides the greatest annual interest?

Which of the following is the formula for compound value?

When using a financial calculator,which of the following is the correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 3% ?

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)?

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

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.

On timeline,the present is represented as

Which of the following is the formula for present value?

Financial managers use the time value of money to

Which of the following statements is FALSE?

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

You just purchased a parcel of land for $10,000.If you expect a 12% annual rate of return on your investment,how much will you sell the land for in 10 years?

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

The last amount shown on a timeline represents the future value of all amounts invested up to that point.

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

An increase in ________ will decrease present value.

What is the present value of an investment that pays $400 at the end of three years and $700 at the end of 10 years if the discount rate is 5%?

The present value of $400 to be received at the end of 10 years,if the discount rate is 5%,is

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?

To find the present value of $1000 discounted for 20 years at 8%,when using a financial calculator,the correct entry is

When performing time value of money computations with a financial calculator or EXCEL,PV and FV must have opposite signs.

Which of the following provides the greatest annual interest?

Which of the following is the formula for compound value?

When using a financial calculator,which of the following is the correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 3% ?

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)?

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