Question 1

"Term" is defined as:

Accepted Answer

A)  a number of years. 
B)  an annuity. 
C)  a period of time. 
D)  when an annuity is calculated. 
A)  a number of years. 
B)  an annuity. 
C)  a period of time. 
D)  when an annuity is calculated.

Question 2

Amortization debt is defined as:

Accepted Answer

A)  paid as a lump sum at the end of a loan. 
B)  repaid principal over the life of the loan. 
C)  the death of a loan. 
D)  repaid in a lump sum at the beginning of a loan. 
A)  paid as a lump sum at the end of a loan. 
B)  repaid principal over the life of the loan. 
C)  the death of a loan. 
D)  repaid in a lump sum at the beginning of a loan.

Question 3

Your rich uncle gave you $10,000 today on your 20th birthday. You want to invest the money and then start making monthly deposits, beginning one month from today, so that you will accumulate $500,000 by the time you are 60 years old. You believe that you can earn 8% on your investment. How much will you have to deposit each month to reach your goal of $500,000 by your 60th birthday?

Accepted Answer

A)  Less than $75 
B)  $76 - $100 
C)  $101 - $125 
D)  $126 - $150 
E)  More than $150 
A)  Less than $75 
B)  $76 - $100 
C)  $101 - $125 
D)  $126 - $150 
E)  More than $150

Question 4

When a loan is amortized over a five year term, the:

Accepted Answer

A)  rate of interest is reduced each year. 
B)  amount of interest paid is reduced each year. 
C)  payment is reduced each year. 
D)  balance is paid as a balloon payment in the fifth year. 
A)  rate of interest is reduced each year. 
B)  amount of interest paid is reduced each year. 
C)  payment is reduced each year. 
D)  balance is paid as a balloon payment in the fifth year.

Question 5

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

Accepted Answer

A) True 
 B)False

Question 6

The present value factor for an annuity:

Accepted Answer

A)  is less than the number of years in the annuity. 
B)  approaches a value of infinity for a perpetuity. 
C)  is greater than the number of years in an annuity. 
D)  a and b 
E)  None of the above 
A)  is less than the number of years in the annuity. 
B)  approaches a value of infinity for a perpetuity. 
C)  is greater than the number of years in an annuity. 
D)  a and b 
E)  None of the above

Question 7

A perpetuity is a stream of:

Accepted Answer

A)  regular payments that go on forever. 
B)  irregular payments for a period of time. 
C)  payments for their present value. 
D)  payments tomorrow. 
A)  regular payments that go on forever. 
B)  irregular payments for a period of time. 
C)  payments for their present value. 
D)  payments tomorrow.

Question 8

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

Accepted Answer

A)  $1,567,455 
B)  $68,613 
C)  $3,457,169 
D)  $1,148,958 
A)  $1,567,455 
B)  $68,613 
C)  $3,457,169 
D)  $1,148,958

Question 9

A bank has agreed to loan you $10,000 at 11% for 5 years. You are required to make equal, annual, end-of-year payments that include both principal and interest on the outstanding balance. Determine the amount of these annual payments (to the nearest dollar).

Accepted Answer

A)  $2,000 
B)  $3,100 
C)  $2,706 
D)  $1,100 
A)  $2,000 
B)  $3,100 
C)  $2,706 
D)  $1,100

Question 10

If an 8-year annuity due has a Future Value (FV) of $10,000 and the interest rate is 7%, what is the amount of each annuity payment?

Accepted Answer

A)  Less than $900 
B)  $901 - $925 
C)  $926 - $950 
D)  $951 - $975 
E)  More than $975 
A)  Less than $900 
B)  $901 - $925 
C)  $926 - $950 
D)  $951 - $975 
E)  More than $975

Question 11

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Accepted Answer

A)  $122.44 
B)  $222.44 
C)  $168.38 
D)  $187.28 
A)  $122.44 
B)  $222.44 
C)  $168.38 
D)  $187.28

Question 12

Which of the following interest rates will come closest to doubling invested money in five years?

Accepted Answer

A)  13% 
B)  14% 
C)  15% 
D)  16% 
A)  13% 
B)  14% 
C)  15% 
D)  16%

Question 13

Many IRA funds argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30-year period?

Accepted Answer

A)  $43,785 
B)  $36,189 
C)  $54,244 
D)  There is no difference. 
A)  $43,785 
B)  $36,189 
C)  $54,244 
D)  There is no difference.

Question 14

You expect to receive $1,000 at the end of each of the next three years that you plan to deposit in a bank account paying 6%. Which of the following expressions will calculate your bank balance just after the last payment is deposited?

Accepted Answer

A)  FV = $1,000 [FVF6,1] + $1,000 [FVF6,2] + $1,000 [FVF6,3] 
B)  FV = $1,000 [1.06]1 + $1,000 [1.06]2 + $1,000 [1.06]3 
C)  FVA3 = $1,000 [FVFA6,3] 
D)  All of the above 
A)  FV = $1,000 [FVF6,1] + $1,000 [FVF6,2] + $1,000 [FVF6,3] 
B)  FV = $1,000 [1.06]1 + $1,000 [1.06]2 + $1,000 [1.06]3 
C)  FVA3 = $1,000 [FVFA6,3] 
D)  All of the above

Question 15

A car loan that charges 1.25% interest per month has an annual percentage rate of:

Accepted Answer

A)  12.50%. 
B)  13.55%. 
C)  15%. 
D)  None of the above 
A)  12.50%. 
B)  13.55%. 
C)  15%. 
D)  None of the above

Question 16

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

Accepted Answer

A)  $2,137.50 
B)  $1,000.00 
C)  $1,666.67 
D)  $1,333.33 
A)  $2,137.50 
B)  $1,000.00 
C)  $1,666.67 
D)  $1,333.33

Question 17

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

Accepted Answer

A)  $3,728 
B)  $4,042 
C)  $2,676 
D)  $547 
E)  $625 
A)  $3,728 
B)  $4,042 
C)  $2,676 
D)  $547 
E)  $625

Question 18

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

Accepted Answer

A)  12% 
B)  11% 
C)  10% 
D)  9% 
A)  12% 
B)  11% 
C)  10% 
D)  9%

Question 19

An annuity is a finite stream of equal payments occurring at regular or irregular time intervals

Accepted Answer

A) True 
 B)False

Question 20

If Susan and Joe set aside $10,000 for college tuition when their daughter is 13, how much will be available when she starts college at 18 if the account in which the money is deposited pays 12 percent compounded monthly?

Accepted Answer

A)  $17,623.42 
B)  $18,170 
C)  $16,105.10 
D)  $16,122.26 
A)  $17,623.42 
B)  $18,170 
C)  $16,105.10 
D)  $16,122.26

"Term" is defined as:

Amortization debt is defined as:

When a loan is amortized over a five year term, the:

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

The present value factor for an annuity:

A perpetuity is a stream of:

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

A bank has agreed to loan you $10,000 at 11% for 5 years. You are required to make equal, annual, end-of-year payments that include both principal and interest on the outstanding balance. Determine the amount of these annual payments (to the nearest dollar).

If an 8-year annuity due has a Future Value (FV) of $10,000 and the interest rate is 7%, what is the amount of each annuity payment?

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Which of the following interest rates will come closest to doubling invested money in five years?

Many IRA funds argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30-year period?

You expect to receive $1,000 at the end of each of the next three years that you plan to deposit in a bank account paying 6%. Which of the following expressions will calculate your bank balance just after the last payment is deposited?

A car loan that charges 1.25% interest per month has an annual percentage rate of:

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

An annuity is a finite stream of equal payments occurring at regular or irregular time intervals

If Susan and Joe set aside $10,000 for college tuition when their daughter is 13, how much will be available when she starts college at 18 if the account in which the money is deposited pays 12 percent compounded monthly?

Foundations

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

International Finance

Filters

Exam 6: Time Value of Money

"Term" is defined as:

Amortization debt is defined as:

When a loan is amortized over a five year term, the:

The future and present value factors are reciprocals. Either amount equation can be used to solve any amount problem.

The present value factor for an annuity:

A perpetuity is a stream of:

If your parents put $2,000 a year into an IRA account for you in each of your last 4 teenage years (age 16,17,18, and 19), how much would the IRA account have in it at your retirement 45 years later if the account earned 12% each year? (Assume end-of-year payments.)

A bank has agreed to loan you $10,000 at 11% for 5 years. You are required to make equal, annual, end-of-year payments that include both principal and interest on the outstanding balance. Determine the amount of these annual payments (to the nearest dollar).

If an 8-year annuity due has a Future Value (FV) of $10,000 and the interest rate is 7%, what is the amount of each annuity payment?

If you were to borrow $10,000 over five years at 12% compounded monthly, what would be your monthly payment?

Which of the following interest rates will come closest to doubling invested money in five years?

Many IRA funds argue that investors should invest at the beginning of the year rather than at the end. What is the difference to an investor who invests $2,000 per year at 11 percent over a 30-year period?

You expect to receive $1,000 at the end of each of the next three years that you plan to deposit in a bank account paying 6%. Which of the following expressions will calculate your bank balance just after the last payment is deposited?

A car loan that charges 1.25% interest per month has an annual percentage rate of:

Assuming a 6% annual discount rate, what is the value of receiving $100.00 annually perpetually beginning next year?

What amount received at the end of 15 years is equivalent to $100 received at the end of each year for 15 years if the interest rate is 12%?

You purchased a piece of property for $30,000 nine years ago and sold it today for $83,190. What was the annual rate of return on your investment?

An annuity is a finite stream of equal payments occurring at regular or irregular time intervals

If Susan and Joe set aside $10,000 for college tuition when their daughter is 13, how much will be available when she starts college at 18 if the account in which the money is deposited pays 12 percent compounded monthly?

Foundations

Financial Background: a Review of Accounting, Financial Statements, and Taxes

Cash Flows and Financial Analysis

Financial Planning

The Financial System, Corporate Governance, and Interest

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

Risk and Return

Capital Budgeting

Cash Flow Estimation

Risk Topics and Real Options in Capital Budgeting

Cost of Capital

Capital Structure and Leverage

Dividends

The Management of Working Capital Multiple Choice Questions

The Management of Working Capital

Corporate Restructuring

International Finance

Filters