Question 1

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 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 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

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 6

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 7

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.

Question 8

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 9

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

Accepted Answer

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

Question 10

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.

Question 11

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 12

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

Accepted Answer

A) True 
 B)False

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

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 15

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

Accepted Answer

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

Question 16

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 17

Payments or receipts of equal dollar amounts are referred to as __________________.

Accepted Answer

The answer of Payments or receipts of equal dollar amounts...

Question 18

The present value of an annuity is the value now of a series of future receipts or payments, discounted assuming compound interest.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Match between columns
                        Premises: The value today of a future amount to be received or paid.
The value at a future date of a given amount invested.
Return on principal plus interest for two or more periods.
Value today of a series of future amounts to be received or paid.
The sum of all the payments or receipts plus the accumulated compound interest on them.

Accepted Answer

The Answer of Compound interest and Future value of a is...

Exam 26: 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?

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

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

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?

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?

Compound interest is the return on principal

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

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

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

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

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

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

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?

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

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

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?

Payments or receipts of equal dollar amounts are referred to as __________________.

The present value of an annuity is the value now of a series of future receipts or payments, discounted assuming compound interest.

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

Match the items below