Question 1

Compounding interest assumes the interest on an investment is reinvested.

Accepted Answer

A) True 
 B)False

Question 2

To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:

Accepted Answer

A) The interest rate or discount rate. 
B) The number of periods. 
C) The future value. 
D) The time between periods.

Question 3

The difference between the present value and the future value of a sum of money depends upon:

Accepted Answer

A) The rate of interest. 
B) The length of time. 
C) The rate of interest and the length of time. 
D) Neither the rate of interest nor the length of time.

Question 4

The lower the discount rate of an investment,the lower the present value of the investment.

Accepted Answer

A) True 
 B)False

Question 5

The present value of a single amount is calculated by multiplying the future amount by the present value of $1 table.

Accepted Answer

A) True 
 B)False

Question 6

The present value of an annuity is calculated by multiplying the periodic cash flows by the discounted factor from the future value of an annuity table.

Accepted Answer

A) True 
 B)False

Question 7

If you receive $20,000 as a gift and invest it at 12% compounded semi-annually,how much will you have at the end of three years? Use Table FA-1.

Accepted Answer

A) $32,020.60 
B) $28,380.00 
C) $22,497.20 
D) $14,027.60

Question 8

Use the tables to determine the answers to the following:
(1)How much must be invested now for 5 periods at 6% to amount to $15,000?
(2)How much is $3,000 invested now at 8% in 8 periods worth?
(3)How much is $25,000 compounded semi-annually at 12% for 4 years?

Accepted Answer

The answer of Use the tables to determine the answers...

Question 9

The obligation for deferred income taxes is the only long-term liability that is not reported at its present value.

Accepted Answer

A) True 
 B)False

Exam 27: the Time Value of Money: Future Amounts and Present Values

Compounding interest assumes the interest on an investment is reinvested.

To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:

The difference between the present value and the future value of a sum of money depends upon:

The lower the discount rate of an investment,the lower the present value of the investment.

The present value of a single amount is calculated by multiplying the future amount by the present value of $1 table.

The present value of an annuity is calculated by multiplying the periodic cash flows by the discounted factor from the future value of an annuity table.

If you receive $20,000 as a gift and invest it at 12% compounded semi-annually,how much will you have at the end of three years? Use Table FA-1.

Use the tables to determine the answers to the following: (1)How much must be invested now for 5 periods at 6% to amount to $15,000? (2)How much is $3,000 invested now at 8% in 8 periods worth? (3)How much is $25,000 compounded semi-annually at 12% for 4 years?

The obligation for deferred income taxes is the only long-term liability that is not reported at its present value.