Question 1

The present value of an investment is:

Accepted Answer

A) The amount an investor would pay today to receive a certain amount in the future. 
B) The amount an investor would pay today plus the interest the investor would expect to receive a certain amount in the future. 
C) The amount an investor would pay today less the interest the investor requires. 
D) 90% of the future value of an investment. 
A) The amount an investor would pay today to receive a certain amount in the future. 
B) The amount an investor would pay today plus the interest the investor would expect to receive a certain amount in the future. 
C) The amount an investor would pay today less the interest the investor requires. 
D) 90% of the future value of an investment.

Question 2

If you invested $10,000 at 6% on your 20th birthday how much would you have on your 40th birthday?

Accepted Answer

A) $32,071.40. 
B) $31,180.00. 
C) $36,785.59. 
D) $12,158.12. 
A) $32,071.40. 
B) $31,180.00. 
C) $36,785.59. 
D) $12,158.12.

Question 3

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 4

The future amount of an annuity is calculated by multiplying the periodic payment amount by the discounted factor from the future value of an annuity table.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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 7

An interest rate of 12% a year is the same as 6% for 2 months.

Accepted Answer

A) True 
 B)False

Question 8

Explain what is meant by the "time value of money." Provide examples.

Accepted Answer

This concept is based on the idea that a

Question 9

The present value of a cash amount:

Accepted Answer

A) Is always less than the future value. 
B) Is always more than the future value. 
C) Is the same as the future value. 
D) Is the same as the actual cash value. 
A) Is always less than the future value. 
B) Is always more than the future value. 
C) Is the same as the future value. 
D) Is the same as the actual cash value.

Question 10

A future amount is the dollar amount to which a present value will ______________ over time.

Accepted Answer

A) vanish 
B) accumulate 
C) disappear 
D) remain 
A) vanish 
B) accumulate 
C) disappear 
D) remain

Question 11

Explain how compound interest applies to the time value of money.

Accepted Answer

The relationship between present and fut

Question 12

The present value of a single amount is calculated by multiplying the future amount by the present value of $1 table.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

As the discount rate required by an investor increases,the present value of an investment decreases.

Accepted Answer

A) True 
 B)False

Question 15

The lower the discount rate of an investment,the lower the present value of the investment.

Accepted Answer

A) True 
 B)False

Question 16

Annuities may provide equal amounts to an investor at fixed periods of time over the life of an investment.

Accepted Answer

A) True 
 B)False

Question 17

How much must I invest today in order to have $25,000 in 5 years assuming 12% interest compounded annually?

Accepted Answer

A) $14,185.75. 
B) $15,888.00. 
C) $18,681.50. 
D) $17.624.00. 
A) $14,185.75. 
B) $15,888.00. 
C) $18,681.50. 
D) $17.624.00.

Question 18

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 19

Judy Bright has just won the lottery.She can elect to receive her winnings in equal payments of $200,000 a year for the next ten years on December 31 or to receive $2,000,000 immediately.If the current interest rate is 6%,which choice will provide the highest amount:

Accepted Answer

A) Receiving $2,000,000 immediately. 
B) Taking equal payments for 10 years. 
C) It does not matter since either choice provides the same amount. 
D) Refusing to accept the winnings since it is not enough. 
A) Receiving $2,000,000 immediately. 
B) Taking equal payments for 10 years. 
C) It does not matter since either choice provides the same amount. 
D) Refusing to accept the winnings since it is not enough.

Question 20

(a)How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b)How long will it take if she invests the same amount at 4% semi-annually?

Accepted Answer

(a)$31,183.95 (appro

Exam 28: The Time Value of Money: Future Amounts and Present Values

The present value of an investment is:

If you invested $10,000 at 6% on your 20th birthday how much would you have on your 40th birthday?

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 amount of an annuity is calculated by multiplying the periodic payment amount by the discounted factor from the future value of an annuity table.

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

Financial instruments do not include:

An interest rate of 12% a year is the same as 6% for 2 months.

Explain what is meant by the "time value of money." Provide examples.

The present value of a cash amount:

A future amount is the dollar amount to which a present value will ______________ over time.

Explain how compound interest applies to the time value of money.

The present value of a single amount is calculated by multiplying the future amount by the present value of $1 table.

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

As the discount rate required by an investor increases,the present value of an investment decreases.

The lower the discount rate of an investment,the lower the present value of the investment.

Annuities may provide equal amounts to an investor at fixed periods of time over the life of an investment.

How much must I invest today in order to have $25,000 in 5 years assuming 12% interest compounded annually?

Compound interest:

Judy Bright has just won the lottery.She can elect to receive her winnings in equal payments of $200,000 a year for the next ten years on December 31 or to receive $2,000,000 immediately.If the current interest rate is 6%,which choice will provide the highest amount:

(a)How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b)How long will it take if she invests the same amount at 4% semi-annually?

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

Management Accounting: a Business Partner

Job Order Cost Systems and Overhead Allocations

Process Costing

Costing and the Value Chain

Cost-Volume-Profit Analysis

Incremental Analysis

Responsibility Accounting and Transfer Pricing

Operational Budgeting

Standard Cost Systems

Rewarding Business Performance

Capital Budgeting

Forms of Business Organization

Filters

If you invested $10,000 at 6% on your 20^th birthday how much would you have on your 40^th birthday?