Question 1

Pedro Gonzalez will invest $5,000 at the beginning of each year for the next 9 years. The interest rate is 8 percent. What is the future value?

Accepted Answer

A)  $58,471. 
B)  $62,440. 
C)  $67,435. 
D)  $72,435. 
A)  $58,471. 
B)  $62,440. 
C)  $67,435. 
D)  $72,435.

Question 2

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

Accepted Answer

A) True 
 B)False

Question 3

The higher the rate used in determining the future value of a $1 annuity,

Accepted Answer

A)  the smaller the future value at the end of the period. 
B)  the greater the future value at the end of a period. 
C)  the greater the present value at the beginning of a period. 
D)  none of these - the interest has no effect on the future value of an annuity. 
A)  the smaller the future value at the end of the period. 
B)  the greater the future value at the end of a period. 
C)  the greater the present value at the beginning of a period. 
D)  none of these - the interest has no effect on the future value of an annuity.

Question 4

After 10 years, 100 shares of stock originally purchased for $500 was sold for $900. What was the yield on the investment? Choose the closest answer.

Accepted Answer

A)  19% 
B)  2.5% 
C)  8.5% 
D)  6% 
A)  19% 
B)  2.5% 
C)  8.5% 
D)  6%

Question 5

As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

Accepted Answer

A) True 
 B)False

Question 6

In January, 2000, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2010 for a total of $9,715.02. Calculate Harold's annual rate of return.

Accepted Answer

The answer of In January, 2000, Harold Black bought 100...

Question 7

John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

Accepted Answer

A)  $3,633 
B)  $9,250 
C)  $13,113 
D)  $15,445 
A)  $3,633 
B)  $9,250 
C)  $13,113 
D)  $15,445

Question 8

Under what conditions must a distinction be made between money to be received today and money to be received in the future?

Accepted Answer

A)  A period of recession. 
B)  When idle money can earn a positive return. 
C)  When there is no risk of nonpayment in the future. 
D)  When current interest rates are different from expected future rates. 
A)  A period of recession. 
B)  When idle money can earn a positive return. 
C)  When there is no risk of nonpayment in the future. 
D)  When current interest rates are different from expected future rates.

Question 9

The Swell Computer Company has developed a new line of desktop computers. It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years, and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year). At a 9% interest rate, what is the present value of these cash returns?

Accepted Answer

The answer of The Swell Computer Company has developed a...

Question 10

The concept of time value of money is important to financial decision making because

Accepted Answer

A)  it emphasizes earning a return on invested capital. 
B)  it recognizes that earning a return makes $1 worth more today than $1 received in the future. 
C)  it can be applied to future cash flows in order to compare different streams of income. 
D)  all of these 
A)  it emphasizes earning a return on invested capital. 
B)  it recognizes that earning a return makes $1 worth more today than $1 received in the future. 
C)  it can be applied to future cash flows in order to compare different streams of income. 
D)  all of these

Question 11

Discounting refers to the growth process that turns $1 today into a greater value several periods in the future.

Accepted Answer

A) True 
 B)False

Question 12

Higher interest rates (discount rates) reduce the present value of amounts to be received in the future.

Accepted Answer

A) True 
 B)False

Question 13

As the time period until receipt increases, the present value of an amount at a fixed interest rate

Accepted Answer

A)  decreases. 
B)  remains the same. 
C)  increases. 
D)  Not enough information to tell. 
A)  decreases. 
B)  remains the same. 
C)  increases. 
D)  Not enough information to tell.

Question 14

As the discount rate becomes higher and higher, the present value of inflows approaches

Accepted Answer

A)  0 
B)  minus infinity 
C)  plus infinity 
D)  need more information 
A)  0 
B)  minus infinity 
C)  plus infinity 
D)  need more information

Question 15

If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.

Accepted Answer

A) True 
 B)False

Question 16

The interest factor for the future value of a single sum is equal to (1 + n)i.

Accepted Answer

A) True 
 B)False

Question 17

To determine the current worth of 4 annual payments of $1,000 at 4%, one would refer to a table for the present value of $1.

Accepted Answer

A) True 
 B)False

Question 18

Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years.

Accepted Answer

A)  12% 
B)  Between 12% and 13% 
C)  About 7% 
D)  Greater than 15% 
A)  12% 
B)  Between 12% and 13% 
C)  About 7% 
D)  Greater than 15%

Question 19

When the inflation rate is zero, the present value of $1 is identical to the future value of $1.

Accepted Answer

A) True 
 B)False

Question 20

In evaluating capital investment projects, current outlays must be judged against the current value of future benefits.

Accepted Answer

A) True 
 B)False

Pedro Gonzalez will invest $5,000 at the beginning of each year for the next 9 years. The interest rate is 8 percent. What is the future value?

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

The higher the rate used in determining the future value of a $1 annuity,

After 10 years, 100 shares of stock originally purchased for $500 was sold for $900. What was the yield on the investment? Choose the closest answer.

As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

In January, 2000, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2010 for a total of $9,715.02. Calculate Harold's annual rate of return.

John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

Under what conditions must a distinction be made between money to be received today and money to be received in the future?

The concept of time value of money is important to financial decision making because

Discounting refers to the growth process that turns $1 today into a greater value several periods in the future.

Higher interest rates (discount rates) reduce the present value of amounts to be received in the future.

As the time period until receipt increases, the present value of an amount at a fixed interest rate

As the discount rate becomes higher and higher, the present value of inflows approaches

If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.

The interest factor for the future value of a single sum is equal to (1 + n)ⁱ.

To determine the current worth of 4 annual payments of $1,000 at 4%, one would refer to a table for the present value of $1.

Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years.

When the inflation rate is zero, the present value of $1 is identical to the future value of $1.

In evaluating capital investment projects, current outlays must be judged against the current value of future benefits.

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants, and Derivatives

External Growth Through Mergers

International Financial Management

Filters

Exam 9: The Time Value of Money

Pedro Gonzalez will invest $5,000 at the beginning of each year for the next 9 years. The interest rate is 8 percent. What is the future value?

The interest factor for the present value of a single amount is the inverse of the future value interest factor.

The higher the rate used in determining the future value of a $1 annuity,

After 10 years, 100 shares of stock originally purchased for $500 was sold for $900. What was the yield on the investment? Choose the closest answer.

As the interest rate increases, the interest factor (IF) for the present value of $1 increases.

In January, 2000, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January, 2010 for a total of $9,715.02. Calculate Harold's annual rate of return.

John Doeber borrowed $150,000 to buy a house. His loan cost was 6% and he promised to repay the loan in 15 equal annual payments. How much are the annual payments?

Under what conditions must a distinction be made between money to be received today and money to be received in the future?

The concept of time value of money is important to financial decision making because

Discounting refers to the growth process that turns $1 today into a greater value several periods in the future.

Higher interest rates (discount rates) reduce the present value of amounts to be received in the future.

As the time period until receipt increases, the present value of an amount at a fixed interest rate

As the discount rate becomes higher and higher, the present value of inflows approaches

If a single amount were put on deposit at a given interest rate and allowed to grow, its future value could be determined by reference to the future value of $1 table.

The interest factor for the future value of a single sum is equal to (1 + n)i.

To determine the current worth of 4 annual payments of $1,000 at 4%, one would refer to a table for the present value of $1.

Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years.

When the inflation rate is zero, the present value of $1 is identical to the future value of $1.

In evaluating capital investment projects, current outlays must be judged against the current value of future benefits.

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

Sources of Short-Term Financing

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Banking: Public and Private Placement

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Convertibles, Warrants, and Derivatives

External Growth Through Mergers

International Financial Management

Filters

The interest factor for the future value of a single sum is equal to (1 + n)ⁱ.