Question 1

The present value of a perpetuity:

Accepted Answer

A)  conceptually doesn't make sense. 
B)  is infinite. 
C)  is zero. 
D)  is not affected by changes in the discount rate. 
E)  None of the above 
A)  conceptually doesn't make sense. 
B)  is infinite. 
C)  is zero. 
D)  is not affected by changes in the discount rate. 
E)  None of the above

Question 2

At the appropriate interest rate people are indifferent between the present and future values of a sum of money.

Accepted Answer

A) True 
 B)False

Question 3

The present value of a future amount is:

Accepted Answer

A)  that sum which if deposited today will grow into the future amount. 
B)  referred to as the discounted value of the future amount. 
C)  always smaller than the future amount, for positive interest rates. 
D)  All of the above 
A)  that sum which if deposited today will grow into the future amount. 
B)  referred to as the discounted value of the future amount. 
C)  always smaller than the future amount, for positive interest rates. 
D)  All of the above

Question 4

You wish to have $10,000 per year as a retirement supplement for 20 years (from age 65-85). You are now 40 years old. How much must you save each year for the next 25 years if you assume your savings will earn 12% annually?

Accepted Answer

A)  $560.17 
B)  $1,499.99 
C)  $5,403.87 
D)  None of the above 
A)  $560.17 
B)  $1,499.99 
C)  $5,403.87 
D)  None of the above

Question 5

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

Accepted Answer

A)  $5,526 
B)  $784 
C)  $1,400 
D)  $1,469 
A)  $5,526 
B)  $784 
C)  $1,400 
D)  $1,469

The present value of a perpetuity:

At the appropriate interest rate people are indifferent between the present and future values of a sum of money.

The present value of a future amount is:

You wish to have $10,000 per year as a retirement supplement for 20 years (from age 65-85). You are now 40 years old. How much must you save each year for the next 25 years if you assume your savings will earn 12% annually?

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

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

The present value of a perpetuity:

At the appropriate interest rate people are indifferent between the present and future values of a sum of money.

The present value of a future amount is:

You wish to have $10,000 per year as a retirement supplement for 20 years (from age 65-85). You are now 40 years old. How much must you save each year for the next 25 years if you assume your savings will earn 12% annually?

Determine how much $1,000 deposited in a savings account paying 8% compounded annually will be worth after 5 years.

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