Question 1

You currently have $2,500 invested at an annual rate of 8%.How long will it take for this investment to grow to a value of $3,500?

Accepted Answer

A) 4.37 years 
B) 5.00 years 
C) 5.60 years 
D) 8.03 years 
A) 4.37 years 
B) 5.00 years 
C) 5.60 years 
D) 8.03 years

Question 2

Which of the following formulas is correct for finding the present value of an investment?

Accepted Answer

A) FV =   
B) PV = FV × (1 + r)n 
C) PV = FVn × (1 + r) 
D) PV = FV ×   
A) FV =   
B) PV = FV × (1 + r)n 
C) PV = FVn × (1 + r) 
D) PV = FV ×

Question 3

Consider the TVM equation: The greater the interest rate,other things remaining equal,the greater the present value.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following actions will INCREASE the present value of an investment?

Accepted Answer

A) Decrease the interest rate. 
B) Decrease the future value. 
C) Increase the amount of time. 
D) All of the above will increase the present value. 
A) Decrease the interest rate. 
B) Decrease the future value. 
C) Increase the amount of time. 
D) All of the above will increase the present value.

Question 5

An investment promises a payoff of $195 two and one-half years from today.At a discount rate of 7.5% per year,what is the present value of this investment?

Accepted Answer

A) $162.03 
B) $162.75 
C) $169.47 
D) There is not enough information to answer this question. 
A) $162.03 
B) $162.75 
C) $169.47 
D) There is not enough information to answer this question.

Question 6

A two-year investment of $3500 is made today at an annual interest rate of 5.75%.Which of the following statements is true?

Accepted Answer

A) The future value would be greater if the interest rate was higher. 
B) The present value would be greater if the interest rate was higher. 
C) The future value would be greater if the interest rate was lower. 
D) The future value does not change as the interest rate changes. 
A) The future value would be greater if the interest rate was higher. 
B) The present value would be greater if the interest rate was higher. 
C) The future value would be greater if the interest rate was lower. 
D) The future value does not change as the interest rate changes.

Question 7

Which of the following actions will DECREASE the present value of an investment?

Accepted Answer

A) Decrease the interest rate. 
B) Decrease the future value. 
C) Decrease the amount of time. 
D) All of the above will decrease the present value. 
A) Decrease the interest rate. 
B) Decrease the future value. 
C) Decrease the amount of time. 
D) All of the above will decrease the present value.

Question 8

Given a time period,an interest rate,and a future value,a person could solve for a present value.

Accepted Answer

A) True 
 B)False

Question 9

Your parts supplier gives you one-quarter of a year to pay for parts ordered today,or offers you a discount if you pay cash at purchase.You have just purchased $73,500 worth of parts from your supplier and the discount is at an annual rate of 8%.How much will you pay for the parts if you pay today?

Accepted Answer

A) $73,500 
B) $72,099 
C) $68,056 
D) $72,046 
A) $73,500 
B) $72,099 
C) $68,056 
D) $72,046

Question 10

Simpson Construction had sales seven years ago of $2,150,000.This year their sales hit $4,600,000.What has been Simpson's average annual rate of growth of sales?

Accepted Answer

A) 30.56% 
B) 11.48% 
C) $350,000 per year 
D) None of the above 
A) 30.56% 
B) 11.48% 
C) $350,000 per year 
D) None of the above

Question 11

Harry decided he was tired of being a poor college student when he visited a local electronics store and experienced its finest home theatre system.He determined that he would invest today a portion of the remaining money he earned last summer cleaning animal cages at the veterinary clinic.He plans to invest the money into an international mutual fund for 3.5 years and expects to earn an average annual rate of return of 15%.If Harry wants to have $4,000 in the account at the end of this time,how much must he invest today?

Accepted Answer

A) $1,253 
B) $2,048 
C) $2,453 
D) $2,591 
A) $1,253 
B) $2,048 
C) $2,453 
D) $2,591

Question 12

What annual rate of return must you earn to double your money in about 9 years? Use the Rule of 72 to determine your answer.

Accepted Answer

A) You would need to earn an annual rate of return of about 12%. 
B) You would need to earn an annual rate of return of about 10%. 
C) You would need to earn an annual rate of return of about 8%. 
D) There is not enough information to answer this question. 
A) You would need to earn an annual rate of return of about 12%. 
B) You would need to earn an annual rate of return of about 10%. 
C) You would need to earn an annual rate of return of about 8%. 
D) There is not enough information to answer this question.

Question 13

You know that regular tax-deferred investments are a popular investment choice for many people preparing for retirement.Did you know that if you invest $2,000 today and at the end of every year for 40 years at an annual rate of 10% that you will have grown your portfolio to a value of $975,704 at the end of that time? How much of that future value dollar amount comes from the $2,000 investment you made today?

Accepted Answer

A) $975,704 
B) $885,185 
C) $23,798 
D) $90,519 
A) $975,704 
B) $885,185 
C) $23,798 
D) $90,519

Question 14

If college tuition and fees increase at an annual rate of 7% per year,and your little sister is currently starting her freshman year in high school,what is the expected cost of her first year of college in four years if tuition and fees are currently $6,850 per year? How much for the start of her senior year of college starting three years after that?

Accepted Answer

FV = PV × (1 + r)n = $6,850 ×

Question 15

Your friend John started college at the age of 18 with $63,450 already saved,because 18 years ago when he was born his parents placed money into a special college savings account earning 7.25% per year.How much money did John's parents place into his college account?

Accepted Answer

A) $18,000 
B) $3,525 
C) $17,262 
D) $5,824 
A) $18,000 
B) $3,525 
C) $17,262 
D) $5,824

Question 16

Your university is running a special offer on tuition.This year's tuition cost is $18,000.Next year's tuition cost is scheduled to be $19,080.The university offers to discount next year's tuition at a rate of 6% if you agree to pay both years' tuition in full today.How much is the total tuition bill today if you take the offer?

Accepted Answer

A) $18,000 
B) $34,981 
C) $37,080 
D) $36,000 
A) $18,000 
B) $34,981 
C) $37,080 
D) $36,000

Question 17

Amy has always planned to save enough money to pay cash for her first new car.If Amy increases the rate she earns on her savings,then she will have to save more money today to buy her car at the same date in the future.

Accepted Answer

A) True 
 B)False

Question 18

The question "How much will I have in my account at a specific point in the future,given a specific interest rate?" is best answered by which form of the TVM equation?

Accepted Answer

A) FV =   
B) FV = PV × (1 + r)n 
C) FV = (FV/PV)1/n -1 
D)  FV =   
A) FV =   
B) FV = PV × (1 + r)n 
C) FV = (FV/PV)1/n -1 
D)  FV =

Question 19

You plan to place a $40,000 down payment on a lake cabin in Northern Minnesota in five years.If you invest in a long-term CD earning an annual rate of 5.50%,how much would you need to invest today to have enough for the down payment in five years?

Accepted Answer

A) $33,326 
B) $30,605 
C) $24,379 
D) $18,264 
A) $33,326 
B) $30,605 
C) $24,379 
D) $18,264

Question 20

The survey results from the National Association of Colleges and Employers (NACE)show the average annual increases in salaries for new accounting graduates to be 3.42% since the year 2000.If new starting salaries in accounting were $36,919 in 2000,what were they in 2011?

Accepted Answer

A) $45,757 
B) $46,718 
C) $53,444 
D) $42,617 
A) $45,757 
B) $46,718 
C) $53,444 
D) $42,617

You currently have $2,500 invested at an annual rate of 8%.How long will it take for this investment to grow to a value of $3,500?

Which of the following formulas is correct for finding the present value of an investment?

Consider the TVM equation: The greater the interest rate,other things remaining equal,the greater the present value.

Which of the following actions will INCREASE the present value of an investment?

An investment promises a payoff of $195 two and one-half years from today.At a discount rate of 7.5% per year,what is the present value of this investment?

A two-year investment of $3500 is made today at an annual interest rate of 5.75%.Which of the following statements is true?

Which of the following actions will DECREASE the present value of an investment?

Given a time period,an interest rate,and a future value,a person could solve for a present value.

Your parts supplier gives you one-quarter of a year to pay for parts ordered today,or offers you a discount if you pay cash at purchase.You have just purchased $73,500 worth of parts from your supplier and the discount is at an annual rate of 8%.How much will you pay for the parts if you pay today?

Simpson Construction had sales seven years ago of $2,150,000.This year their sales hit $4,600,000.What has been Simpson's average annual rate of growth of sales?

What annual rate of return must you earn to double your money in about 9 years? Use the Rule of 72 to determine your answer.

Your friend John started college at the age of 18 with $63,450 already saved,because 18 years ago when he was born his parents placed money into a special college savings account earning 7.25% per year.How much money did John's parents place into his college account?

Amy has always planned to save enough money to pay cash for her first new car.If Amy increases the rate she earns on her savings,then she will have to save more money today to buy her car at the same date in the future.

The question "How much will I have in my account at a specific point in the future,given a specific interest rate?" is best answered by which form of the TVM equation?

You plan to place a $40,000 down payment on a lake cabin in Northern Minnesota in five years.If you invest in a long-term CD earning an annual rate of 5.50%,how much would you need to invest today to have enough for the down payment in five years?

The survey results from the National Association of Colleges and Employers (NACE)show the average annual increases in salaries for new accounting graduates to be 3.42% since the year 2000.If new starting salaries in accounting were $36,919 in 2000,what were they in 2011?

Financial Management

Financial Statements

The Time Value of Money Part 2

Interest Rates

Bonds and Bond Valuation

Stocks and Stock Valuation

Risk and Return

Capital Budgeting Decision Models

Cash Flow Estimation

The Cost of Capital

Forecasting and Short-Term Financial Planning

Working Capital Management

Financial Ratios and Firm Performance

Raising Capital

Capital Structure

Dividends,dividend Policy,and Stock Splits

International Financial Management

Filters

Exam 3: The Time Value of Money Part 1

You currently have $2,500 invested at an annual rate of 8%.How long will it take for this investment to grow to a value of $3,500?

Which of the following formulas is correct for finding the present value of an investment?

Consider the TVM equation: The greater the interest rate,other things remaining equal,the greater the present value.

Which of the following actions will INCREASE the present value of an investment?

An investment promises a payoff of $195 two and one-half years from today.At a discount rate of 7.5% per year,what is the present value of this investment?

A two-year investment of $3500 is made today at an annual interest rate of 5.75%.Which of the following statements is true?

Which of the following actions will DECREASE the present value of an investment?

Given a time period,an interest rate,and a future value,a person could solve for a present value.

Your parts supplier gives you one-quarter of a year to pay for parts ordered today,or offers you a discount if you pay cash at purchase.You have just purchased $73,500 worth of parts from your supplier and the discount is at an annual rate of 8%.How much will you pay for the parts if you pay today?

Simpson Construction had sales seven years ago of $2,150,000.This year their sales hit $4,600,000.What has been Simpson's average annual rate of growth of sales?

What annual rate of return must you earn to double your money in about 9 years? Use the Rule of 72 to determine your answer.

Your friend John started college at the age of 18 with $63,450 already saved,because 18 years ago when he was born his parents placed money into a special college savings account earning 7.25% per year.How much money did John's parents place into his college account?

Amy has always planned to save enough money to pay cash for her first new car.If Amy increases the rate she earns on her savings,then she will have to save more money today to buy her car at the same date in the future.

The question "How much will I have in my account at a specific point in the future,given a specific interest rate?" is best answered by which form of the TVM equation?

You plan to place a $40,000 down payment on a lake cabin in Northern Minnesota in five years.If you invest in a long-term CD earning an annual rate of 5.50%,how much would you need to invest today to have enough for the down payment in five years?

The survey results from the National Association of Colleges and Employers (NACE)show the average annual increases in salaries for new accounting graduates to be 3.42% since the year 2000.If new starting salaries in accounting were $36,919 in 2000,what were they in 2011?

Financial Management

Financial Statements

The Time Value of Money Part 2

Interest Rates

Bonds and Bond Valuation

Stocks and Stock Valuation

Risk and Return

Capital Budgeting Decision Models

Cash Flow Estimation

The Cost of Capital

Forecasting and Short-Term Financial Planning

Working Capital Management

Financial Ratios and Firm Performance

Raising Capital

Capital Structure

Dividends,dividend Policy,and Stock Splits

International Financial Management

Filters