Question 1

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 answers are correct.

Question 2

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 3

The future value of an annuity factor for two 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 4

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

Pleasant Company has decided to begin accumulating a fund for plant expansion.The company deposited $80,000 in a fund on January 2, 2019.Pleasant will also deposit $40,000 annually at the end of each year, starting in 2019.The fund pays interest at 4% compounded annually.What is the balance of the fund at the end of 2023 (after the 2023 deposit)?

Accepted Answer

The answer of Pleasant Company has decided to begin accumulating...

Question 6

Rob Honda plans to buy a home and can deposit $15,000 for the purchase today.If the annual interest rate is 8%, how much can Rob expect to have for a down payment in five years?

Accepted Answer

The answer of Rob Honda plans to buy a home...

Question 7

Perdue Company has purchased equipment that requires annual payments of $30,000 to be paid at the end of each of the next six 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 8

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 9

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 10

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

Accepted Answer

A) True 
 B)False

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 three years is

Accepted Answer

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

Question 12

Wingate Company borrowed $90,000 on January 2, 2020.This amount plus accrued interest of 6% compounded annually will be repaid at the end of three 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 13

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 14

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 15

The present value of a long-term note or bond is a function of two variables.

Accepted Answer

A) True 
 B)False

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

Match the items (1-5) by entering the appropriate code letter in the space provided.

Accepted Answer

The answer of Match the items (1-5) by entering the...

Question 18

Hazel Company has just purchased equipment that requires annual payments of $40,000 to be paid at the end of each of the next four 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 19

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 20

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...

Exam 14: Time Value of Money

Present value is based on

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 future value of an annuity factor for two periods is equal to

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

Rob Honda plans to buy a home and can deposit $15,000 for the purchase today.If the annual interest rate is 8%, how much can Rob expect to have for a down payment in five years?

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

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

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?

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

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 three years is

Wingate Company borrowed $90,000 on January 2, 2020.This amount plus accrued interest of 6% compounded annually will be repaid at the end of three years.What amount will Wingate repay at the end of the third year?

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

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

The present value of a long-term note or bond is a function of two variables.

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?

Match the items (1-5) by entering the appropriate code letter in the space provided.

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

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?

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.