Question 1

Two banks each have stated CD rates of 12%.Bank A compounds quarterly and Bank B compounds semiannually.Explain which bank offers the better CD.

Accepted Answer

The yield on a CD increases with more fr...

Question 2

The concept that interest causes the value of money received today to be greater than the value of that same amount of money received in the future is referred to as the:

Accepted Answer

A)  Monetary unit assumption.
B)  Historical cost principle.
C)  Time value of money.
D)  Matching principle.E) C) and D)
F) None of the above

Question 3

Sandra won $5,000,000 in the state lottery which she has elected to receive at the end of each month over the next thirty years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Accepted Answer

A)  Future value of $1.
B)  Present value of $1.
C)  Future value of an annuity of $1.
D)  Present value of an annuity of $1.E) None of the above
F) B) and D)

Question 4

What is the value today of receiving five annual payments of $500,000,beginning one year from now,assuming an 11% discount rate?

Accepted Answer

A)  $2,500,000.
B)  $2,225,000.
C)  $1,847,950.
D)  $2,115,270.E) All of the above
F) None of the above

Question 5

The discount rate is the rate at which someone is willing to give up current dollars for future dollars.

Accepted Answer

A) True 
 B)False

Question 6

Match between columns
                        Premises: Accumulation of an amount with interest.
Interest earned on the initial investment and on previous interest.
A series of equal periodic payments.
Accumulation of a series of equal payments.
A dollar now is worth more than a dollar later.

Accepted Answer

The Answer of Future value of an annuity and Discount is...

Question 7

The value of $1 today is worth more than $1 one year from now.

Accepted Answer

A) True 
 B)False

Question 8

How much will $25,000 grow to in seven years,assuming an interest rate of 12% compounded annually?

Accepted Answer

A)  $55,267.
B)  $46,000.
C)  $61,899.
D)  $52,344.E) A) and C)
F) B) and C)

Question 9

The time value of money is a concept which means that the value of $1 increases over time.

Accepted Answer

A) True 
 B)False

Question 10

Below are excerpts from interest tables for 8% interest. 
 1‾2‾3‾4‾11.00000.925931.080000.9259322.08000.857341.166401.7832633.24640.7938331.259712.5771044.50610.735031.360493.31213\begin{array} { c c c c c } & \underline { 1 } & \underline { 2 } & \underline { 3 } & \underline { 4 } \1 & 1.0000 & 0.92593 & 1.08000 & 0.92593 \2 & 2.0800 & 0.85734 & 1.16640 & 1.78326 \3 & 3.2464 & 0.793833 & 1.25971 & 2.57710 \4 & 4.5061 & 0.73503 & 1.36049 & 3.31213\end{array}1234​1​1.00002.08003.24644.5061​2​0.925930.857340.7938330.73503​3​1.080001.166401.259711.36049​4​0.925931.783262.577103.31213​ 
Column 2 is an interest table for the:

Accepted Answer

A)  Future value of $1.
B)  Present value of $1.
C)  Future value of an annuity of $1.
D)  Present value of an annuity of $1. E) All of the above
F) A) and B)

Question 11

An annuity is a series of equal cash payments over equal time intervals.

Accepted Answer

A) True 
 B)False

Question 12

The future value of $1,000 invested today for three years that earns 10% compounded annually is greater than the future value of a $500 annuity with the same interest rate over the same period.

Accepted Answer

A) True 
 B)False

Question 13

At the end of the next four years,a new machine is expected to generate net cash flows of $8,000,$12,000,$10,000,and $15,000,respectively.What are the cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Accepted Answer

A)  $41,557.
B)  $47,700.
C)  $32,403.
D)  $38,108.E) None of the above
F) A) and D)

Question 14

Anthony would like to have $18,000 to buy a new car in three years.Currently,he has saved $15,000.If he puts $15,000 in an account that earns 6% interest,compounded annually,will he be able to buy the car in three years?

Accepted Answer

The answer of Anthony would like to have $18,000 to...

Exam 13: Time Value of Money

Anthony would like to have $18,000 to buy a new car in three years.Currently,he has saved $15,000.If he puts $15,000 in an account that earns 6% interest,compounded annually,will he be able to buy the car in three years?

Correct Answer
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Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.

At the end of the next four years,a new machine is expected to generate net cash flows of $8,000,$12,000,$10,000,and $15,000,respectively.What are the cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Correct Answer
verified

Correct Answer
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An annuity is a series of equal cash payments over equal time intervals.

Correct Answer
verified

The value of $1 today is worth more than $1 one year from now.

Correct Answer
verified

The time value of money is a concept which means that the value of $1 increases over time.

Correct Answer
verified

The future value of $1,000 invested today for three years that earns 10% compounded annually is greater than the future value of a $500 annuity with the same interest rate over the same period.

Correct Answer
verified

How much will $25,000 grow to in seven years,assuming an interest rate of 12% compounded annually?

Correct Answer
verified

Two banks each have stated CD rates of 12%.Bank A compounds quarterly and Bank B compounds semiannually.Explain which bank offers the better CD.

Correct Answer
verified
The yield on a CD increases with more fr...
View Answer

The concept that interest causes the value of money received today to be greater than the value of that same amount of money received in the future is referred to as the:

Correct Answer
verified

The discount rate is the rate at which someone is willing to give up current dollars for future dollars.

Correct Answer
verified

What is the value today of receiving five annual payments of $500,000,beginning one year from now,assuming an 11% discount rate?

Correct Answer
verified

Sandra won $5,000,000 in the state lottery which she has elected to receive at the end of each month over the next thirty years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Correct Answer
verified

Exam 13: Time Value of Money

Anthony would like to have $18,000 to buy a new car in three years.Currently,he has saved $15,000.If he puts $15,000 in an account that earns 6% interest,compounded annually,will he be able to buy the car in three years?

Correct AnswerverifiedShow Answer

Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the best term placing the letter designating the term in the space provided.

At the end of the next four years,a new machine is expected to generate net cash flows of $8,000,$12,000,$10,000,and $15,000,respectively.What are the cash flows worth today if a 3% interest rate properly reflects the time value of money in this situation?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An annuity is a series of equal cash payments over equal time intervals.

Correct AnswerverifiedShow Answer

The value of $1 today is worth more than $1 one year from now.

Correct AnswerverifiedShow Answer

The time value of money is a concept which means that the value of $1 increases over time.

Correct AnswerverifiedShow Answer

The future value of $1,000 invested today for three years that earns 10% compounded annually is greater than the future value of a $500 annuity with the same interest rate over the same period.

Correct AnswerverifiedShow Answer

How much will $25,000 grow to in seven years,assuming an interest rate of 12% compounded annually?

Correct AnswerverifiedShow Answer

Two banks each have stated CD rates of 12%.Bank A compounds quarterly and Bank B compounds semiannually.Explain which bank offers the better CD.

Correct AnswerverifiedThe yield on a CD increases with more fr...View AnswerShow Answer

The concept that interest causes the value of money received today to be greater than the value of that same amount of money received in the future is referred to as the:

Correct AnswerverifiedShow Answer

The discount rate is the rate at which someone is willing to give up current dollars for future dollars.

Correct AnswerverifiedShow Answer

What is the value today of receiving five annual payments of $500,000,beginning one year from now,assuming an 11% discount rate?

Correct AnswerverifiedShow Answer

Sandra won $5,000,000 in the state lottery which she has elected to receive at the end of each month over the next thirty years.She will receive 7% interest on unpaid amounts.To determine the amount of her monthly check,she should use a table for the:

Correct AnswerverifiedShow Answer

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The yield on a CD increases with more fr...
View Answer

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Correct Answer
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Correct Answer
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