Question 1

With a financial calculator, one can solve for any interest rate or for any number of periods in a time value of money problem.

Accepted Answer

A) True 
 B)False  True

Question 2

Present value is based on

Accepted Answer

A)  the dollar amount to be received.
B)  the length of time until the amount is received.
C)  the interest rate.
D)  all of these. D

Question 3

The present value of $10,000 to be received in 5 years will be smaller if the discount rate is

Accepted Answer

A)  increased.
B)  decreased.
C)  not changed.
D)  equal to the stated rate of interest. A

Question 4

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

Accepted Answer

A)  $8,500.
B)  $7,830.
C)  $8,638.
D)  $8,860.

Question 5

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.

Question 6

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

Accepted Answer

A)  $274,380
B)  $165,290
C)  $320,000
D)  $160,000

Question 7

The decision to make long-term capital investments is best evaluated using discounting techniques that recognize the time value of money.

Accepted Answer

A) True 
 B)False

Question 8

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?

Accepted Answer

A)  Future value of 1
B)  Future value of an annuity of 1
C)  Present value of 1
D)  Present value of an annuity of 1

Question 9

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 10

A higher discount rate produces a higher present value.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not necessary to know in computing the future value of an annuity?

Accepted Answer

A)  Amount of the periodic payments
B)  Interest rate
C)  Number of compounding periods
D)  Year the payments begin

Question 12

Peter Johnson invests $35,516.80 now for a series of $5,000 annual returns beginning one year from now.Peter will earn 10% on the initial investment.How many annual payments will Peter receive?

Accepted Answer

A)  10
B)  12
C)  13
D)  15

Question 13

If you are able to earn a 15% rate of return, what amount would you need to invest to have $15,000 one year from now?

Accepted Answer

A)  $14,852
B)  $13,125
C)  $12,750
D)  $13,044

Question 14

Interest is the difference between the amount borrowed and the principal.

Accepted Answer

A) True 
 B)False

Question 15

In computing the present value of an annuity, it is not necessary to know the number of discount periods.

Accepted Answer

A) True 
 B)False

Question 16

Which table has a factor of 1.00000 for 1 period at every interest rate?

Accepted Answer

A)  Future value of 1
B)  Future value of an annuity of 1
C)  Present value of 1
D)  Present value of an annuity of 1

Question 17

A $10,000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

Accepted Answer

A)  5 interest periods, 6% interest
B)  20 interest periods, 6% interest
C)  20 interest periods, 1.5% interest
D)  5 interest periods, 1.5% interest

Question 18

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 19

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 20

All of the following are necessary to compute the future value of a single amount except the

Accepted Answer

A)  interest rate.
B)  number of periods.
C)  principal.
D)  maturity value.

Exam 15: Time Value of Money and Present Value Calculations

With a financial calculator, one can solve for any interest rate or for any number of periods in a time value of money problem.

Present value is based on

The present value of $10,000 to be received in 5 years will be smaller if the discount rate is

The amount you must deposit now in your savings account, paying 5% interest, in order to accumulate $10,000 for your first tuition payment when you start college in 3 years is

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

The decision to make long-term capital investments is best evaluated using discounting techniques that recognize the time value of money.

The factor 1.0609 is taken from the 3% column and 2 periods row in a certain table.From what table is this factor taken?

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?

A higher discount rate produces a higher present value.

Which of the following is not necessary to know in computing the future value of an annuity?

Peter Johnson invests $35,516.80 now for a series of $5,000 annual returns beginning one year from now.Peter will earn 10% on the initial investment.How many annual payments will Peter receive?

If you are able to earn a 15% rate of return, what amount would you need to invest to have $15,000 one year from now?

Interest is the difference between the amount borrowed and the principal.

In computing the present value of an annuity, it is not necessary to know the number of discount periods.

Which table has a factor of 1.00000 for 1 period at every interest rate?

A $10,000, 6%, 5-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

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?

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?

All of the following are necessary to compute the future value of a single amount except the