Question 1

The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000.
Calculation: $2,000 x 0.5002 = $1,000.

Accepted Answer

A) True 
 B)False  True

Question 2

You are little late planning your retirement, but are looking forward to retiring in 10 years. You expect to save $6,000 a year at an annual rate of 8%. How much will you have accumulated when you retire?

Accepted Answer

Answers will vary

Question 3

With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%
Calculation: $5,000 x 7.7156 = $38,578.

Accepted Answer

A) True 
 B)False  True

Question 4

In a present value or future value table, the length of one time period may be interpreted as one year, one month, or any other length of time.

Accepted Answer

A) True 
 B)False

Question 5

A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest?

Accepted Answer

The answer of A company is beginning a savings plan....

Question 6

A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return?

Accepted Answer

A)  $55,606. 
B)  $137,681. 
C)  $222,425. 
D)  $265,764. 
E)  $350,000. 
A)  $55,606. 
B)  $137,681. 
C)  $222,425. 
D)  $265,764. 
E)  $350,000.

Question 7

An _____________ is a series of equal payments occurring at equal intervals.

Accepted Answer

The answer of An _____________ is a series of equal...

Question 8

Explain the concept of the present value of an annuity.

Accepted Answer

The present value of an annuit

Question 9

A company expects to invest $5,000 today at 12% annual interest and plans to receive $15,529 at the end of the investment period. How many years will elapse before the company accumulates the $15,529?

Accepted Answer

A)  0.322 years. 
B)  3.1058 years. 
C)  5 years. 
D)  8 years. 
E)  10 years. 
A)  0.322 years. 
B)  3.1058 years. 
C)  5 years. 
D)  8 years. 
E)  10 years.

Question 10

A company can use present and future value computations to estimate the interest component of holding assets over time.

Accepted Answer

A) True 
 B)False

Question 11

Daley Co. lends $524,210 to Davis Corporation. The terms of the loan require that Davis make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Davis paying on the loan?

Accepted Answer

The answer of Daley Co. lends $524,210 to Davis Corporation....

Question 12

Interest is:

Accepted Answer

A)  Time. 
B)  A borrower's payment to the owner of an asset for its use. 
C)  The same as a savings account. 
D)  Always a liability. 
E)  Always an asset. 
A)  Time. 
B)  A borrower's payment to the owner of an asset for its use. 
C)  The same as a savings account. 
D)  Always a liability. 
E)  Always an asset.

Question 13

Thompson Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years. This transaction includes interest at 8%, compounded semiannually. What is the value of the machine today?

Accepted Answer

The answer of Thompson Company has acquired a machine from...

Question 14

The present value of an annuity table can be used to determine the series of equal payments that are required by a loan agreement.

Accepted Answer

A) True 
 B)False

Question 15

At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in 5 years.
Calculation: $7,210.65/$5,300 = 1.3605. This is the future value of 1 factor for 4 periods, 8%.

Accepted Answer

A) True 
 B)False

Question 16

The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment.

Accepted Answer

A) True 
 B)False

Question 17

What is interest?

Accepted Answer

Interest represents

Question 18

To calculate present value of an amount, two factors are required: __________________ and __________________.

Accepted Answer

Interest r

Question 19

A company is considering an investment that will return $20,000 semiannually at the end of each semiannual period for 4 years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment?

Accepted Answer

A)  Not more than $63,398. 
B)  Not more than $126,796. 
C)  Not more than $80,000. 
D)  Not more than $129,264. 
E)  Not more than $160,000. 
A)  Not more than $63,398. 
B)  Not more than $126,796. 
C)  Not more than $80,000. 
D)  Not more than $129,264. 
E)  Not more than $160,000.

Question 20

Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take him to reach his retirement goal of $69,080?

Accepted Answer

A)  13.816 years 
B)  0.072 years 
C)  10 years 
D)  20 years 
E)  5 years 
A)  13.816 years 
B)  0.072 years 
C)  10 years 
D)  20 years 
E)  5 years

Exam 26: Time Value of Money

The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000. Calculation: $2,000 x 0.5002 = $1,000.

You are little late planning your retirement, but are looking forward to retiring in 10 years. You expect to save $6,000 a year at an annual rate of 8%. How much will you have accumulated when you retire?

With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10% Calculation: $5,000 x 7.7156 = $38,578.

In a present value or future value table, the length of one time period may be interpreted as one year, one month, or any other length of time.

A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest?

A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return?

An _____________ is a series of equal payments occurring at equal intervals.

Explain the concept of the present value of an annuity.

A company expects to invest $5,000 today at 12% annual interest and plans to receive $15,529 at the end of the investment period. How many years will elapse before the company accumulates the $15,529?

A company can use present and future value computations to estimate the interest component of holding assets over time.

Daley Co. lends $524,210 to Davis Corporation. The terms of the loan require that Davis make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Davis paying on the loan?

Interest is:

Thompson Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years. This transaction includes interest at 8%, compounded semiannually. What is the value of the machine today?

The present value of an annuity table can be used to determine the series of equal payments that are required by a loan agreement.

At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in 5 years. Calculation: $7,210.65/$5,300 = 1.3605. This is the future value of 1 factor for 4 periods, 8%.

The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment.

What is interest?

To calculate present value of an amount, two factors are required: __________________ and __________________.

A company is considering an investment that will return $20,000 semiannually at the end of each semiannual period for 4 years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment?

Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take him to reach his retirement goal of $69,080?

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Filters

To calculate present value of an amount, two factors are required: and .