Question 1

If the single amount of $3,000 is to be received in 3 years and discounted at 6%, its present value is

Accepted Answer

A) $2,519. 
B) $2,830. 
C) $2,600. 
D) $2,820.

Question 2

Compound interest is the return on principal

Accepted Answer

A) only. 
B) for one or more periods. 
C) plus interest for two or more periods. 
D) for one period.

Question 3

In present value calculations, the process of determining the present value is called

Accepted Answer

A) allocating. 
B) pricing. 
C) negotiating. 
D) discounting.

Question 4

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Accepted Answer

A) True 
 B)False

Question 5

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

Accepted Answer

A) True 
 B)False

Question 6

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity table.

Accepted Answer

A) True 
 B)False

Question 7

The future value of 1 factor will always be

Accepted Answer

A) equal to 1. 
B) greater than 1. 
C) less than 1. 
D) equal to the interest rate.

Question 8

The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

Accepted Answer

A) True 
 B)False

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 $5,000,000 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

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%

Question 11

The process of determining the present value is referred to as discounting the future amount.

Accepted Answer

A) True 
 B)False

Question 12

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

Accepted Answer

A) 10 
B) 11 
C) 12 
D) 13

Question 13

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

Accepted Answer

A) $1,200. 
B) $4,484. 
C) $4,477. 
D) $4,200.

Question 14

Which of the following accounting problems does not involve a present value calculation?

Accepted Answer

A) The determination of the market price of a bond. 
B) The determination of the declining-balance depreciation expense. 
C) The determination of the amount to report for long-term notes payable. 
D) The determination of the amount to report for lease liability.

Question 15

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

Accepted Answer

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

Question 16

McGoff Company deposits $20,000 in a fund at the end of each year for 5 years.The fund pays interest of 4% compounded annually.The balance in the fund at the end of 5 years is computed by multiplying

Accepted Answer

A) $20,000 by the future value of 1 factor. 
B) $100,000 by 1.04. 
C) $100,000 by 1.20. 
D) $20,000 by the future value of an annuity factor.

Question 17

If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

Accepted Answer

A) $48,867 
B) $315,000 
C) $377,337 
D) $450,000

Question 18

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

Accepted Answer

A) $27,747 
B) $27,778 
C) $27,273 
D) $29,700

Question 19

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.

Exam 15: Time Value of Money and Present Value Calculations

If the single amount of $3,000 is to be received in 3 years and discounted at 6%, its present value is

Compound interest is the return on principal

In present value calculations, the process of determining the present value is called

Compound interest is computed on the principal and any interest earned that has not been paid or received.

Many companies calculate the future value of the cash flows involved in an investment in evaluating long-term capital investments.

When the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity table.

The future value of 1 factor will always be

The future value of a single amount is the value at a future date of a given amount invested now, assuming compound interest.

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?

The process of determining the present value is referred to as discounting the future amount.

Suzy Douglas has been offered the opportunity of investing $73,540 now.The investment will earn 8% per year and at the end of its life will return $200,000 to Suzy.How many years must Suzy wait to receive the $200,000?

The amount you must deposit now in your savings account, paying 6% interest, in order to accumulate $6,000 for a down payment 5 years from now on a new car is

Which of the following accounting problems does not involve a present value calculation?

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

McGoff Company deposits $20,000 in a fund at the end of each year for 5 years.The fund pays interest of 4% compounded annually.The balance in the fund at the end of 5 years is computed by multiplying

If $30,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

If you are able to earn an 8% rate of return, what amount would you need to invest to have $30,000 one year from now?

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