Question 1

At 8%, compounded annually, how long will it take $750 to double?

Accepted Answer

A)  9 years 
B)  8 years 
C)  12 years 
D)  4 years 
E)  6 years 
A)  9 years 
B)  8 years 
C)  12 years 
D)  4 years 
E)  6 years

Question 2

Assuming equal annual rates, the more frequent the compounding periods in a year, the higher the future value.

Accepted Answer

A) True 
 B)False

Question 3

A timeline represents the value of a sum invested now at the end of a series of time periods.

Accepted Answer

A) True 
 B)False

Question 4

If you deposit $1,000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years?

Accepted Answer

FV[10] = $

Question 5

How many periods would it take for the deposit to grow to $6,798 if the interest is compounded semiannually?

Accepted Answer

A)  17 
B)  19 
C)  21 
D)  25 
A)  17 
B)  19 
C)  21 
D)  25

Question 6

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

Accepted Answer

A)  $100,000 now. 
B)  $10,000 at the end of each of the next 12 years. 
C)  The answer depends on the time value of money. 
D)  Either alternative is equally valuable. 
A)  $100,000 now. 
B)  $10,000 at the end of each of the next 12 years. 
C)  The answer depends on the time value of money. 
D)  Either alternative is equally valuable.

Question 7

Using a financial calculator, which of the following would be a correct way to find how long it would take for a sum to triple at a rate of 3%?

Accepted Answer

A)  i=5, PV=-1, PMT=0, FV=3, solve for N 
B)  i=5, PV=1, PMT=0, FV=3, solve for N 
C)  i=.05, PV=-1, PMT=0, FV=3, solve for N 
D)  Financial calculators cannot be used to solve this problem. 
A)  i=5, PV=-1, PMT=0, FV=3, solve for N 
B)  i=5, PV=1, PMT=0, FV=3, solve for N 
C)  i=.05, PV=-1, PMT=0, FV=3, solve for N 
D)  Financial calculators cannot be used to solve this problem.

Question 8

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

Accepted Answer

A)  51.7% 
B)  6.7% 
C)  10.9% 
D)  6.1% 
A)  51.7% 
B)  6.7% 
C)  10.9% 
D)  6.1%

Question 9

Stephen's grandmother deposited $100 in an investment account for him when he was born, 25 years ago. The account is now worth $1,500. What was the average rate of return on the account?

Accepted Answer

A)  6.00% 
B)  16.67% 
C)  15.00% 
D)  11.44% 
A)  6.00% 
B)  16.67% 
C)  15.00% 
D)  11.44%

Question 10

A timeline typically represents cash flows as an exponential growth curve.

Accepted Answer

A) True 
 B)False

Question 11

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Accepted Answer

A)  $1,048 
B)  $1,010 
C)  $1,038 
D)  $808 
A)  $1,048 
B)  $1,010 
C)  $1,038 
D)  $808

Question 12

Timelines used to visualize cash flows normally represent present values on the left and future values on the right.

Accepted Answer

A) True 
 B)False

Question 13

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

Accepted Answer

A) True 
 B)False

At 8%, compounded annually, how long will it take $750 to double?

Assuming equal annual rates, the more frequent the compounding periods in a year, the higher the future value.

A timeline represents the value of a sum invested now at the end of a series of time periods.

If you deposit $1,000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years?

How many periods would it take for the deposit to grow to $6,798 if the interest is compounded semiannually?

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

Using a financial calculator, which of the following would be a correct way to find how long it would take for a sum to triple at a rate of 3%?

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

Stephen's grandmother deposited $100 in an investment account for him when he was born, 25 years ago. The account is now worth $1,500. What was the average rate of return on the account?

A timeline typically represents cash flows as an exponential growth curve.

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Timelines used to visualize cash flows normally represent present values on the left and future values on the right.

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters

Exam 5: Time Value of Money-The Basics

At 8%, compounded annually, how long will it take $750 to double?

Assuming equal annual rates, the more frequent the compounding periods in a year, the higher the future value.

A timeline represents the value of a sum invested now at the end of a series of time periods.

If you deposit $1,000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years?

How many periods would it take for the deposit to grow to $6,798 if the interest is compounded semiannually?

Should you prefer to receive $100,000 right now or $10,000 at the end of each of the next 12 years?

Using a financial calculator, which of the following would be a correct way to find how long it would take for a sum to triple at a rate of 3%?

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

Stephen's grandmother deposited $100 in an investment account for him when he was born, 25 years ago. The account is now worth $1,500. What was the average rate of return on the account?

A timeline typically represents cash flows as an exponential growth curve.

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1)?

Timelines used to visualize cash flows normally represent present values on the left and future values on the right.

The annual percentage rate on two different investments will equal the effective annual rate on the two investments only if interest on both investments is compounded annually.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, Taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters