Question 1

If Sloane Joyner invests $10,514.81 now and she will receive $30,000 at the end of 11 years, what annual rate of interest will she be earning on her investment?

Accepted Answer

A)   8%
B)   8.5%
C)   9%
D)   10% D

Question 2

If the single amount of $2,000 is to be received in 2 years and discounted at 11%, its present value is

Accepted Answer

A)   $1,818.
B)   $1,623.
C)   $1,802.
D)   $2,754. B

Question 3

A higher discount rate produces a higher present value.

Accepted Answer

A) True 
 B)False  False

Question 4

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next 4 years. The appropriate discount rate is 15%. What is the present value of the payments?

Accepted Answer

A)   $114,199
B)   $160,000
C)   $46,975
D)   $150,135

Question 5

Martin Company issued $900,000, 10-year bonds and agreed to make annual sinking fund deposits of $72,000. The deposits are made at the end of each year to a fund paying 5% interest compounded annually. What amount will be in the sinking fund at the end of the 10 years?

Accepted Answer

The answer of Martin Company issued $900,000, 10-year bonds and...

Question 6

Compute the future value of $6,000 invested every year at an interest rate of 9%. You invest the money for 20 years with the first payment made at the end of the year.

Accepted Answer

The answer of Compute the future value of $6,000 invested...

Question 7

Frye Company is considering investing in an annuity contract that will return $50,000 annually at the end of each year for 20 years. What amount should Frye Company pay for this investment if it earns an 8% return?

Accepted Answer

The answer of Frye Company is considering investing in an...

Question 8

The future value of an annuity factor for 2 periods is equal to

Accepted Answer

A)   1 plus the interest rate.
B)   2 plus the interest rate.
C)   2 minus the interest rate.
D)   2.

Question 9

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

Accepted Answer

A)   $2,518,860.
B)   $2,591,520.
C)   $2,670,000.
D)   $3,000,000.

Question 10

Lucky Lou has just won the lottery and will receive an annual payment of $100,000 every year for the next 20 years. If the annual interest rate is 8%, what is the present value of the winnings?

Accepted Answer

The answer of Lucky Lou has just won the lottery...

Question 11

Flower Company is considering an investment which will return a lump sum of $2,500,000 six years from now. What amount should Flower Company pay for this investment to earn an 11% return?

Accepted Answer

The answer of Flower Company is considering an investment which...

Question 12

Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next 6 years. The appropriate discount rate is 12%. What amount will be used to record the equipment?

Accepted Answer

A)   $180,000
B)   $123,342
C)   $165,772
D)   $115,650

Question 13

What is the present value of $90,000 due 7 years from now, discounted at 9%?
(b) What is the present value of $150,000 due 5 years from now, discounted at 12%?

Accepted Answer

The answer of What is the present value of $90,000...

Question 14

Dexter Company is considering purchasing equipment. The equipment will produce the following cash flows: Year $1 \quad \$ 120,000$
Year $2 \quad \$ 200,000$ Dexter requires a minimum rate of return of 10%. What is the maximum price Dexter should pay for this equipment?

Accepted Answer

A)   $274,381
B)   $165,290
C)   $320,000
D)   $160,000

Question 15

The _____________________ of an annuity is the sum of all the payments plus the accumulated compound interest on them.

Accepted Answer

The answer of The _____________________ of an annuity is the...

Question 16

If $40,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

Accepted Answer

A)   $32,878
B)   $48,000
C)   $48,620
D)   $48,666

Question 17

Wingate Company borrowed $90,000 on January 2, 2017. This amount plus accrued interest of 6% compounded annually will be repaid at the end of 3 years. What amount will Wingate repay at the end of the third year?

Accepted Answer

The answer of Wingate Company borrowed $90,000 on January 2,...

Question 18

Robin Clark has a cell phone that she uses only for emergencies. The cost of the phone is $40 a month. The cellular company is offering unlimited nights and weekends for an additional $10 a month ($120 a year). Robin thinks it would be "cool" to have this benefit and after all $10 a month is not so much. Show Robin how much she will have in 20 years if she invests this $120 a year at 9% instead of accepting the unlimited nights and weekends offer.

Accepted Answer

The answer of Robin Clark has a cell phone that...

Question 19

Bill Cigarettes acquired a bad habit of smoking in high school. Bill spends approximately $70 a month or $840 a year on cigarettes. He is not concerned with health issues, but he is keenly aware of financial issues. Show Bill how much he would have at retirement in 20 years if he invested $840 a year at 8% instead of smoking.

Accepted Answer

The answer of Bill Cigarettes acquired a bad habit of...

Question 20

Which of the following discount rates will produce the smallest present value?

Accepted Answer

A)   8%
B)   9%
C)   10%
D)   4%

Exam 14: Specimen Financial Statements: Apple Inc