Question 1

Suppose that in 2015,a $10 silver certificate from 1898 sold for $11,700.For this to have been true,what would the annual increase in the value of the certificate have been?

Accepted Answer

A)  6.22 percent
B)  6.01 percent
C)  7.23 percent
D)  6.49 percent
E)  7.07 percentF) B) and D)
G) B) and E)

Question 2

Sixty years ago,your grandparents opened two savings accounts and deposited $250 in each account.The first account was with City Bank at 3.6 percent,compounded annually.The second account was with Country Bank at 3.65 percent,compounded annually.Which one of the following statements is true concerning these accounts? (Do not round intermediate calculations.)

Accepted Answer

A)  The City Bank account is currently worth $2,076.42.
B)  The City Bank account has paid $48.19 more in interest than the Country Bank account.
C)  The Country Bank account is currently worth $2,170.32.
D)  The Country Bank account has paid $72.24 more in interest than the City Bank account.
E)  The Country Bank account has paid $61.30 more in interest than the City Bank account.F) A) and B)
G) B) and E)

Question 3

Given an interest rate of zero percent,the future value of a lump sum invested today will always:

Accepted Answer

A)  remain constant, regardless of the investment time period.
B)  decrease if the investment time period is shortened.
C)  decrease if the investment time period is lengthened.
D)  be equal to $0.
E)  be infinite in value.F) C) and E)
G) A) and C)

Question 4

Rob wants to invest $15,000 for 7 years.Which one of the following rates will provide him with the largest future value?

Accepted Answer

A)  3 percent simple interest
B)  3 percent interest, compounded annually
C)  2 percent interest, compounded annually
D)  4 percent simple interest
E)  4 percent interest, compounded annuallyF) D) and E)
G) A) and B)

Question 5

Which one of the following is a correct statement,all else held constant?

Accepted Answer

A)  The present value is inversely related to the future value.
B)  The future value is inversely related to the period of time.
C)  The period of time is directly related to the interest rate.
D)  The present value is directly related to the interest rate.
E)  The future value is directly related to the interest rate.F) B) and E)
G) B) and C)

Question 6

You want to invest an amount of money today and receive back twice that amount in the future.You expect to earn 6 percent interest.Approximately how long must you wait for your investment to double in value?

Accepted Answer

A)  6 years
B)  7 years
C)  8 years
D)  12 years
E)  14 yearsF) A) and E)
G) A) and C)

Question 7

Kendall is investing $3,333 today at 3 percent annual interest for three years.Which one of the following will increase the future value of that amount?

Accepted Answer

A)  Shortening the investment time period
B)  Paying interest only on the principal amount
C)  Paying simple interest rather than compound interest
D)  Paying interest only at the end of the investment period rather than throughout the investment period
E)  Increasing the interest rateF) B) and E)
G) All of the above

Question 8

You expect to receive $5,000 at graduation one year from now.Your plan is to invest this money at 6.5 percent,compounded annually,until you have $50,000.At that time,you plan to travel around the world.How long from now will it be until you can begin your travels?

Accepted Answer

A)  36.57 years
B)  31.08 years
C)  34.55 years
D)  32.08 years
E)  37.57yearsF) B) and E)
G) A) and E)

Question 9

Angela has just received an insurance settlement of $22,500.She wants to save this money until her daughter goes to college.If she can earn an average of 4.7 percent,compounded annually,how much will she have saved when her daughter enters college 6 years from now?

Accepted Answer

A)  $30,106.14
B)  $30,929.02
C)  $31,374.89
D)  $29,875.06
E)  $29,638.94F) A) and B)
G) C) and D)

Question 10

How long will it take to double your savings if you earn 6.4 percent interest,compounded annually?

Accepted Answer

A)  11.89 years
B)  12.02 years
C)  11.39 years
D)  11.17 years
E)  10.58 yearsF) A) and B)
G) A) and E)

Question 11

The future value of a lump sum investment will increase if you:

Accepted Answer

A)  decrease the interest rate.
B)  decrease the number of compounding periods.
C)  increase the time period.
D)  decrease the time period.
E)  decrease the lump sum amount.F) A) and D)
G) C) and E)

Question 12

Stacey deposits $5,000 into an account that pays 2 percent interest,compounded annually.At the same time,Kurt deposits $5,000 into an account paying 3.5 percent interest,compounded annually.At the end of three years:

Accepted Answer

A)  Both Stacey and Kurt will have accounts of equal value.
B)  Kurt will have twice the money saved that Stacey does.
C)  Kurt will earn exactly twice the amount of interest that Stacey earns.
D)  Kurt will have a larger account value than Stacey will.
E)  Stacey will have more money saved than Kurt.F) A) and E)
G) A) and C)

Question 13

Your parents spent $7,800 to buy 200 shares of stock in a new company 12 years ago.The stock has appreciated 14.6 percent per year on average.What is the current value of those 200 shares?

Accepted Answer

A)  $36,408.70
B)  $40,023.03
C)  $39,580.92
D)  $40,515.08
E)  $37,449.92F) A) and D)
G) C) and E)

Question 14

By definition,a bank that pays simple interest on a savings account will pay interest:

Accepted Answer

A)  only at the beginning of the investment period.
B)  on interest.
C)  only on the principal amount originally invested.
D)  on both the principal amount and the reinvested interest.
E)  only if all previous interest payments are reinvested.F) C) and D)
G) B) and D)

Question 15

You have $5,000 you want to invest for the next 45 years.You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.How much will you have at the end of the 45 years?

Accepted Answer

A)  $201,516.38
B)  $209,092.540
C)  $209,092.54
D)  -$209,092.54
E)  $221,408.97F) None of the above
G) C) and E)

Question 16

Ben invested $7,500 twenty years ago with an insurance company that has paid him 6 percent simple interest on his funds.Charles invested $7,500 twenty years ago in a fund that has paid him 6 percent interest,compounded annually.How much more interest has Charles earned than Ben over the past 20 years?

Accepted Answer

A)  $0
B)  $6,827.04
C)  $7,553.52
D)  $7,109.16
E)  $8,266.49F) B) and C)
G) None of the above

Question 17

You are scheduled to receive $7,500 in two years.When you receive it,you will invest it at 4.5 percent per year.How much will your investment be worth ten years from now?

Accepted Answer

A)  $10,665.75
B)  $11,428.09
C)  $9,110.24
D)  $10,113.33
E)  $11,617.07F) A) and D)
G) C) and D)

Question 18

You have been told that you need $32,000 today for each $100,000 you want when you retire 28 years from now.What rate of interest was used in the present value computation? Assume interest is compounded annually.

Accepted Answer

A)  4.15 percent
B)  4.37 percent
C)  4.29 percent
D)  4.53 percent
E)  4.58 percentF) B) and E)
G) All of the above

Question 19

Today,Charity wants to invest less than $3,000 with the goal of receiving $3,000 back some time in the future.Which one of the following statements is correct?

Accepted Answer

A)  The period of time she has to wait until she reaches her goal is unaffected by the compounding of interest.
B)  The lower the rate of interest she earns, the shorter the time she will have to wait to reach her goal.
C)  She will have to wait longer if she earns 6 percent compound interest instead of 6 percent simple interest.
D)  The length of time she has to wait to reach her goal is directly related to the interest rate she earns.
E)  The period of time she has to wait decreases as the amount she invests increases.F) None of the above
G) All of the above

Question 20

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

Accepted Answer

A)  compounding.
B)  factoring.
C)  time valuation.
D)  simple cash flow valuation.
E)  discounted cash flow valuation.F) All of the above
G) A) and B)

Exam 4: Introduction to Valuation: The Time Value of Money

You have $5,000 you want to invest for the next 45 years.You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.How much will you have at the end of the 45 years?

Correct Answer
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Kendall is investing $3,333 today at 3 percent annual interest for three years.Which one of the following will increase the future value of that amount?

Correct Answer
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Correct Answer
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The future value of a lump sum investment will increase if you:

Correct Answer
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Angela has just received an insurance settlement of $22,500.She wants to save this money until her daughter goes to college.If she can earn an average of 4.7 percent,compounded annually,how much will she have saved when her daughter enters college 6 years from now?

Correct Answer
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By definition,a bank that pays simple interest on a savings account will pay interest:

Correct Answer
verified

Your parents spent $7,800 to buy 200 shares of stock in a new company 12 years ago.The stock has appreciated 14.6 percent per year on average.What is the current value of those 200 shares?

Correct Answer
verified

Rob wants to invest $15,000 for 7 years.Which one of the following rates will provide him with the largest future value?

Correct Answer
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You want to invest an amount of money today and receive back twice that amount in the future.You expect to earn 6 percent interest.Approximately how long must you wait for your investment to double in value?

Correct Answer
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Today,Charity wants to invest less than $3,000 with the goal of receiving $3,000 back some time in the future.Which one of the following statements is correct?

Correct Answer
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Correct Answer
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Given an interest rate of zero percent,the future value of a lump sum invested today will always:

Correct Answer
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You have been told that you need $32,000 today for each $100,000 you want when you retire 28 years from now.What rate of interest was used in the present value computation? Assume interest is compounded annually.

Correct Answer
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You are scheduled to receive $7,500 in two years.When you receive it,you will invest it at 4.5 percent per year.How much will your investment be worth ten years from now?

Correct Answer
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Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

Correct Answer
verified

Suppose that in 2015,a $10 silver certificate from 1898 sold for $11,700.For this to have been true,what would the annual increase in the value of the certificate have been?

Correct Answer
verified

Which one of the following is a correct statement,all else held constant?

Correct Answer
verified

You expect to receive $5,000 at graduation one year from now.Your plan is to invest this money at 6.5 percent,compounded annually,until you have $50,000.At that time,you plan to travel around the world.How long from now will it be until you can begin your travels?

Correct Answer
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Stacey deposits $5,000 into an account that pays 2 percent interest,compounded annually.At the same time,Kurt deposits $5,000 into an account paying 3.5 percent interest,compounded annually.At the end of three years:

Correct Answer
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How long will it take to double your savings if you earn 6.4 percent interest,compounded annually?

Correct Answer
verified

Exam 4: Introduction to Valuation: The Time Value of Money

You have $5,000 you want to invest for the next 45 years.You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.How much will you have at the end of the 45 years?

Correct AnswerverifiedShow Answer

Kendall is investing $3,333 today at 3 percent annual interest for three years.Which one of the following will increase the future value of that amount?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The future value of a lump sum investment will increase if you:

Correct AnswerverifiedShow Answer

Angela has just received an insurance settlement of $22,500.She wants to save this money until her daughter goes to college.If she can earn an average of 4.7 percent,compounded annually,how much will she have saved when her daughter enters college 6 years from now?

Correct AnswerverifiedShow Answer

By definition,a bank that pays simple interest on a savings account will pay interest:

Correct AnswerverifiedShow Answer

Your parents spent $7,800 to buy 200 shares of stock in a new company 12 years ago.The stock has appreciated 14.6 percent per year on average.What is the current value of those 200 shares?

Correct AnswerverifiedShow Answer

Rob wants to invest $15,000 for 7 years.Which one of the following rates will provide him with the largest future value?

Correct AnswerverifiedShow Answer

You want to invest an amount of money today and receive back twice that amount in the future.You expect to earn 6 percent interest.Approximately how long must you wait for your investment to double in value?

Correct AnswerverifiedShow Answer

Today,Charity wants to invest less than $3,000 with the goal of receiving $3,000 back some time in the future.Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Given an interest rate of zero percent,the future value of a lump sum invested today will always:

Correct AnswerverifiedShow Answer

You have been told that you need $32,000 today for each $100,000 you want when you retire 28 years from now.What rate of interest was used in the present value computation? Assume interest is compounded annually.

Correct AnswerverifiedShow Answer

You are scheduled to receive $7,500 in two years.When you receive it,you will invest it at 4.5 percent per year.How much will your investment be worth ten years from now?

Correct AnswerverifiedShow Answer

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

Correct AnswerverifiedShow Answer

Suppose that in 2015,a $10 silver certificate from 1898 sold for $11,700.For this to have been true,what would the annual increase in the value of the certificate have been?

Correct AnswerverifiedShow Answer

Which one of the following is a correct statement,all else held constant?

Correct AnswerverifiedShow Answer

You expect to receive $5,000 at graduation one year from now.Your plan is to invest this money at 6.5 percent,compounded annually,until you have $50,000.At that time,you plan to travel around the world.How long from now will it be until you can begin your travels?

Correct AnswerverifiedShow Answer

Stacey deposits $5,000 into an account that pays 2 percent interest,compounded annually.At the same time,Kurt deposits $5,000 into an account paying 3.5 percent interest,compounded annually.At the end of three years:

Correct AnswerverifiedShow Answer

How long will it take to double your savings if you earn 6.4 percent interest,compounded annually?

Correct AnswerverifiedShow Answer

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