Question 1

Future value can be found if the interest rate (i), the number of periods (n), and the present value
(p) are known.

Accepted Answer

A) True 
 B)False  True

Question 2

A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest?

Accepted Answer

$239,061

Question 3

Interest may be defined as:

Accepted Answer

A)   A borrower's payment to the owner of an asset for its use.
B)   The future value of a present amount.
C)   Always an asset.
D)   Always a liability.
E)   Time. A

Question 4

A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $55,606
B)   $350,000
C)   $222,425
D)   $137,681
E)   $265,764

Question 5

A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $112,095
B)   $141,000
C)   $105,000
D)   $100,000
E)   $45,000

Question 6

An _ _ is a series of equal payments occurring at equal intervals.

Accepted Answer

The answer of An _ _ is a series of...

Question 7

Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $45,125.00
B)   $100,000.00
C)   $47,500.00
D)   $38,608.50
E)   $50,000.00

Question 8

Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?

Accepted Answer

A)   2%
B)   12%
C)   1%
D)   6%
E)   3%

Question 9

An annuity is a series of equal payments occurring at equal intervals.

Accepted Answer

A) True 
 B)False

Question 10

A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $62,582
B)   $47,840
C)   $57,040
D)   $58,075
E)   $58,204

Question 11

The future value of an ________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

Accepted Answer

The answer of The future value of an ________ annuity...

Question 12

The present value of $5,000 per year for three years at 12% compounded annually is $12,009. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A) True 
 B)False

Question 13

An individual is planning to set-up an education fund for her daughter. She plans to invest $7,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 9 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $50,400
B)   $45,360
C)   $87,413
D)   $126,000
E)   $68,040

Question 14

Clara is setting up a retirement fund, and she plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take her to reach her retirement goal of $69,082? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   20 years
B)   13.816 years
C)   10 years
D)   0.072 years
E)   5 years

Question 15

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for 7 years. What is the amount of the annual deposits that the company must make?

Accepted Answer

The answer of A company is setting up a sinking...

Question 16

Pelcher Company acquires a machine by issuing a note that requires semiannual payments of $4,000 for 3 years. The interest rate on the note is 10% compounded semiannually. What is the cost of the machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $17,421.20
B)   $10,892.80
C)   $20,302.80
D)   $24,000.00
E)   $ 9.947.41

Question 17

Cody invests $1,800 per year from his summer wages at a 4% annual interest rate. He plans to take a European vacation at the end of 4 years when he graduates from college. How much will he have available to spend on his vacation? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   $7,643.70
B)   $7,200.00
C)   $7,488.00
D)   $6,912.00
E)   $7,787.52

Question 18

Giuliani Co. lends $524,210 to Craig Corporation. The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Craig paying on the loan?

Accepted Answer

The answer of Giuliani Co. lends $524,210 to Craig Corporation....

Question 19

Marc Lewis expects an investment of $25,000 to return $6,595 annually. His investment is earning 10% per year. How many annual payments will he receive? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A)   Five payments
B)   More than six payments
C)   Six payments
D)   Four payments
E)   Three payments

Question 20

The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Accepted Answer

A) True 
 B)False

Exam 26: Present and Future Values in Accounting

Future value can be found if the interest rate (i), the number of periods (n), and the present value (p) are known.

A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest?

Interest may be defined as:

An _ _ is a series of equal payments occurring at equal intervals.

Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?

An annuity is a series of equal payments occurring at equal intervals.

A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years? (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.)

The future value of an ________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

The present value of $5,000 per year for three years at 12% compounded annually is $12,009. (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.)

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for 7 years. What is the amount of the annual deposits that the company must make?

Giuliani Co. lends $524,210 to Craig Corporation. The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Craig paying on the loan?

Marc Lewis expects an investment of $25,000 to return $6,595 annually. His investment is earning 10% per year. How many annual payments will he receive? (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.)

The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462. (^PV^of^$1, ^FV^of^$1, ^PVA^of^$1, and ^FVA^of^$1) (Use appropriate factor(s) from the tables provided.)