Question 1

A person has an individual retirement account and can deposit $2,000 a year. What will be the difference in the amount in the account if this investor earns 8% instead of 6%?​

Accepted Answer

The answer of A person has an individual retirement account...

Question 2

​An investment is expected to generate $1,000,000 each year for 4 years. If the firm's cost of funds is 10%, what is the maximum amount the firm should pay for the investment?

Accepted Answer

The answer of ​An investment is expected to generate $1,000,000...

Question 3

For investors, an annuity due ​

Accepted Answer

A) 
​is to be preferred to an ordinary annuity 
B) 
​is worth less than an equal lump sum received at the end of the time period 
C) 
​receives payments at the end of the time period 
D) 
​produces unequal payments

Question 4

An employee and employer contribute $3,000 annually for 20 years to a retirement account that earns 9 percent a year, how much will the employee be able to withdraw from the account for 25 years?​

Accepted Answer

The answer of An employee and employer contribute $3,000 annually...

Question 5

You purchase a home for $100,000 with a 20-year mortgage at 12%. If you make annual mortgage payments that pay the interest and reduce the principal, by how much is the loan reduced at the end of the first year?​

Accepted Answer

The answer of You purchase a home for $100,000 with...

Question 6

In an ordinary annuity, the payments are made at the beginning of the year.​

Accepted Answer

A) True 
 B)False

Question 7

Discounting refers to the process of bringing the future back to the present.​

Accepted Answer

A) True 
 B)False

Question 8

​The present value of an annuity due

Accepted Answer

A)  ​is less than the present value of an ordinary annuity 
B)  ​is greater than the present value of an ordinary due 
C)  ​is less than the cost of the annuity 
D)  ​is greater than the cost of the annuity

Question 9

​You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20 years, what is the annual payment required to retire the mortgage loan?

Accepted Answer

The answer of ​You borrow $100,000 to buy a house;...

Question 10

You are offered two jobs. One initially pays $45,000 annually, and your salary will grow annually at 10%. The other pays $42,000 annually, but your salary will grow at 12%. After 10 years, which job pays the higher salary?​

Accepted Answer

The answer of You are offered two jobs. One initially...

Question 11

An annuity offers $1,000 for 10 years. If you can earn 12 percent annually on your funds, what is the maximum amount you should pay for this annuity?​

Accepted Answer

The answer of An annuity offers $1,000 for 10 years....

Question 12

An apartment will generate $12,000 a year for 5 years, after which you expect to sell the property for $100,000. What is the maximum you should pay for the property if your cost of money is 10%?​

Accepted Answer

The answer of An apartment will generate $12,000 a year...

Question 13

It takes longer than 8 years to retire a $24,000 loan at 8% if the annual payment is $3,000.​

Accepted Answer

A) True 
 B)False

Exam 7: The Time Value of Money

A person has an individual retirement account and can deposit $2,000 a year. What will be the difference in the amount in the account if this investor earns 8% instead of 6%?​

​An investment is expected to generate $1,000,000 each year for 4 years. If the firm's cost of funds is 10%, what is the maximum amount the firm should pay for the investment?

For investors, an annuity due ​

An employee and employer contribute $3,000 annually for 20 years to a retirement account that earns 9 percent a year, how much will the employee be able to withdraw from the account for 25 years?​

You purchase a home for $100,000 with a 20-year mortgage at 12%. If you make annual mortgage payments that pay the interest and reduce the principal, by how much is the loan reduced at the end of the first year?​

In an ordinary annuity, the payments are made at the beginning of the year.​

Discounting refers to the process of bringing the future back to the present.​

​The present value of an annuity due

​You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20 years, what is the annual payment required to retire the mortgage loan?

You are offered two jobs. One initially pays $45,000 annually, and your salary will grow annually at 10%. The other pays $42,000 annually, but your salary will grow at 12%. After 10 years, which job pays the higher salary?​

An annuity offers $1,000 for 10 years. If you can earn 12 percent annually on your funds, what is the maximum amount you should pay for this annuity?​

An apartment will generate $12,000 a year for 5 years, after which you expect to sell the property for $100,000. What is the maximum you should pay for the property if your cost of money is 10%?​

It takes longer than 8 years to retire a $24,000 loan at 8% if the annual payment is $3,000.​

A person has an individual retirement account and can deposit $2,000 a year. What will be the difference in the amount in the account if this investor earns 8% instead of 6%?

An investment is expected to generate $1,000,000 each year for 4 years. If the firm's cost of funds is 10%, what is the maximum amount the firm should pay for the investment?

For investors, an annuity due

An employee and employer contribute $3,000 annually for 20 years to a retirement account that earns 9 percent a year, how much will the employee be able to withdraw from the account for 25 years?

You purchase a home for $100,000 with a 20-year mortgage at 12%. If you make annual mortgage payments that pay the interest and reduce the principal, by how much is the loan reduced at the end of the first year?

In an ordinary annuity, the payments are made at the beginning of the year.

Discounting refers to the process of bringing the future back to the present.

The present value of an annuity due

You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20 years, what is the annual payment required to retire the mortgage loan?

You are offered two jobs. One initially pays $45,000 annually, and your salary will grow annually at 10%. The other pays $42,000 annually, but your salary will grow at 12%. After 10 years, which job pays the higher salary?

An annuity offers $1,000 for 10 years. If you can earn 12 percent annually on your funds, what is the maximum amount you should pay for this annuity?

An apartment will generate $12,000 a year for 5 years, after which you expect to sell the property for $100,000. What is the maximum you should pay for the property if your cost of money is 10%?

It takes longer than 8 years to retire a $24,000 loan at 8% if the annual payment is $3,000.