Question 1

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 2

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

Accepted Answer

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

Question 3

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 $3,000,000 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 4

Mandy How plans to buy an automobile and can deposit $3,000 toward the purchase today.If the annual interest rate is 8%, how much can Mandy expect to have as a down payment in three years?

Accepted Answer

The answer of Mandy How plans to buy an automobile...

Question 5

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 6

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 7

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 8

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

Accepted Answer

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

Question 9

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

Question 10

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 11

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 five years?

Accepted Answer

A) $32,878 
B) $48,000 
C) $48,620 
D) $48,666

Question 12

A higher discount rate produces a higher present value.

Accepted Answer

A) True 
 B)False

Exam 14: Time Value of Money

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?

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

Mandy How plans to buy an automobile and can deposit $3,000 toward the purchase today.If the annual interest rate is 8%, how much can Mandy expect to have as a down payment in three years?

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

The future value of 1 factor will always be

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?

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

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

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

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 five years?

A higher discount rate produces a higher present value.