Question 1

Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.

Accepted Answer

A) True 
 B)False

Question 2

Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?

Accepted Answer

He should

Question 3

Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?

Accepted Answer

The answer of Powers Company wishes to issue $2,000,000 of...

Question 4

The time value of money is based on the idea that:

Accepted Answer

A)  The value of money in the future equals the interest received in the present. 
B)  The value of money in the future will be greater than an amount available today. 
C)  The value of money at present over some length of time will be reduced by inflation. 
D)  The future value of money will become the current value as time passes. 
A)  The value of money in the future equals the interest received in the present. 
B)  The value of money in the future will be greater than an amount available today. 
C)  The value of money at present over some length of time will be reduced by inflation. 
D)  The future value of money will become the current value as time passes.

Question 5

The present value of an annuity is calculated by multiplying the periodic cash flows by the discounted factor from the future value of an annuity table.

Accepted Answer

A) True 
 B)False

Question 6

The future value of an investment gradually increases toward the present amount.

Accepted Answer

A) True 
 B)False

Question 7

An annuity due assumes the cash flow will occur at the beginning of the period.

Accepted Answer

A) True 
 B)False

Question 8

The future amount of an annuity is calculated by multiplying the present value of the annuity by its applicable factor from a table.

Accepted Answer

A) True 
 B)False

Question 9

If I invest $20,000 at 2.5% today, how long will it take to reach a minimum of $50,000 compounded semi-annually?

Accepted Answer

A)  5 years. 
B)  19 years. 
C)  9 and ½ years. 
D)  17 years. 
A)  5 years. 
B)  19 years. 
C)  9 and ½ years. 
D)  17 years.

Question 10

Financial instruments do not include:

Accepted Answer

A)  Contracts that call for receipts or payment of cash. 
B)  Equity investment in another business. 
C)  Cash. 
D)  Tangible assets. 
A)  Contracts that call for receipts or payment of cash. 
B)  Equity investment in another business. 
C)  Cash. 
D)  Tangible assets.

Question 11

The rate of interest is usually expressed as an annual rate.

Accepted Answer

A) True 
 B)False

Question 12

A note that does not include an interest rate should be recorded at:

Accepted Answer

A)  Its face amount if the difference between face and present value is material. 
B)  Its present value if the difference between face and present value is material. 
C)  Its face amount at all times. 
D)  Its present value at all times. 
A)  Its face amount if the difference between face and present value is material. 
B)  Its present value if the difference between face and present value is material. 
C)  Its face amount at all times. 
D)  Its present value at all times.

Question 13

If I invest $50,000 today for 5 years and it grows to $84,253, what rate of interest have I received?

Accepted Answer

A)  5%. 
B)  6%. 
C)  11%. 
D)  12%. 
A)  5%. 
B)  6%. 
C)  11%. 
D)  12%.

Question 14

The present value of an ordinary annuity is the amount that equals payments made at the end of successive equal periods is worth today.

Accepted Answer

A) True 
 B)False

Question 15

Compound interest:

Accepted Answer

A)  Is interest only on the principal amount for several years. 
B)  Is interest on the principal and previously earned interest. 
C)  Is interest only on previous interest excluding the principal. 
D)  Is equal to simple interest received for several years. 
A)  Is interest only on the principal amount for several years. 
B)  Is interest on the principal and previously earned interest. 
C)  Is interest only on previous interest excluding the principal. 
D)  Is equal to simple interest received for several years.

Question 16

Your wealthy aunt wishes to give you a trip to Paris when you graduate from college in three years. She estimates the trip will cost $4,000. How much must she invest now at 4% to accumulate enough for you to take this trip?

Accepted Answer

A)  $3,287.72. 
B)  $3,556.00. 
C)  $4,499.44. 
D)  $3,161.24. 
A)  $3,287.72. 
B)  $3,556.00. 
C)  $4,499.44. 
D)  $3,161.24.

Question 17

Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?

Accepted Answer

A)  $1,000. 
B)  $1,105.13. 
C)  $1,077.50. 
D)  $1,082.37. 
A)  $1,000. 
B)  $1,105.13. 
C)  $1,077.50. 
D)  $1,082.37.

Question 18

The market price of a bond is equal to its present value.

Accepted Answer

A) True 
 B)False

Question 19

To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:

Accepted Answer

A)  The interest rate or discount rate. 
B)  The number of periods. 
C)  The future value. 
D)  The time between periods. 
A)  The interest rate or discount rate. 
B)  The number of periods. 
C)  The future value. 
D)  The time between periods.

Question 20

The present value of a single amount can only be calculated through the application of complex calculations.

Accepted Answer

A) True 
 B)False

Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.

Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?

Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?

The time value of money is based on the idea that:

The present value of an annuity is calculated by multiplying the periodic cash flows by the discounted factor from the future value of an annuity table.

The future value of an investment gradually increases toward the present amount.

An annuity due assumes the cash flow will occur at the beginning of the period.

The future amount of an annuity is calculated by multiplying the present value of the annuity by its applicable factor from a table.

If I invest $20,000 at 2.5% today, how long will it take to reach a minimum of $50,000 compounded semi-annually?

Financial instruments do not include:

The rate of interest is usually expressed as an annual rate.

A note that does not include an interest rate should be recorded at:

If I invest $50,000 today for 5 years and it grows to $84,253, what rate of interest have I received?

The present value of an ordinary annuity is the amount that equals payments made at the end of successive equal periods is worth today.

Compound interest:

Your wealthy aunt wishes to give you a trip to Paris when you graduate from college in three years. She estimates the trip will cost $4,000. How much must she invest now at 4% to accumulate enough for you to take this trip?

Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?

The market price of a bond is equal to its present value.

To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:

The present value of a single amount can only be calculated through the application of complex calculations.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

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Exam 16: The Time Value of Money

Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.

Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?

Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?

The time value of money is based on the idea that:

The present value of an annuity is calculated by multiplying the periodic cash flows by the discounted factor from the future value of an annuity table.

The future value of an investment gradually increases toward the present amount.

An annuity due assumes the cash flow will occur at the beginning of the period.

The future amount of an annuity is calculated by multiplying the present value of the annuity by its applicable factor from a table.

If I invest $20,000 at 2.5% today, how long will it take to reach a minimum of $50,000 compounded semi-annually?

Financial instruments do not include:

The rate of interest is usually expressed as an annual rate.

A note that does not include an interest rate should be recorded at:

If I invest $50,000 today for 5 years and it grows to $84,253, what rate of interest have I received?

The present value of an ordinary annuity is the amount that equals payments made at the end of successive equal periods is worth today.

Compound interest:

Your wealthy aunt wishes to give you a trip to Paris when you graduate from college in three years. She estimates the trip will cost $4,000. How much must she invest now at 4% to accumulate enough for you to take this trip?

Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?

The market price of a bond is equal to its present value.

To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:

The present value of a single amount can only be calculated through the application of complex calculations.

Accounting: Information for Decision Making

Basic Financial Statements

The Accounting Cycle: Capturing Economic Events

The Accounting Cycle: Accruals and Deferrals

The Accounting Cycle: Reporting Financial Results

Merchandising Activities

Financial Assets

Inventories and the Cost of Goods Sold

Plant and Intangible Assets

Liabilities

Stockholders Equity: Paid-In Capital

Income and Changes in Retained Earnings

Statement of Cash Flows

Financial Statement Analysis

Global Business and Accounting

Filters