Question 1

Angela expects to save $500 a year and earn an average annual return of 5.2 percent.How much will her savings be worth 35 years from now?

Accepted Answer

A) $51,317.82 
B) $57,702.57 
C) $47,076.06 
D) $44,868.92 
E) $56,063.66 
A) $51,317.82 
B) $57,702.57 
C) $47,076.06 
D) $44,868.92 
E) $56,063.66

Question 2

Tracie invested $60,000 in exchange for payments of $2,500 a year forever.What rate of return is she earning?

Accepted Answer

A) 4)25% 
B) 4)17% 
C) 4)43% 
D) 4)50% 
E) 4)67% 
A) 4)25% 
B) 4)17% 
C) 4)43% 
D) 4)50% 
E) 4)67%

Question 3

1 year ago,the Jenkins Center opened an investment account and deposited $5,000.Today,it is depositing an additional $6,000 and will make a final deposit of $7,500 1 year from now.How much will the firm have saved 3 years from now if it earns an average annual return of 6.5 percent?

Accepted Answer

A) $19,159.67 
B) $22,430.84 
C) $23,628.86 
D) $20,832.60 
E) $22,186.72 
A) $19,159.67 
B) $22,430.84 
C) $23,628.86 
D) $20,832.60 
E) $22,186.72

Question 4

Today,the Corner Store borrowed $11,680 at 6.3 percent,compounded monthly.The loan payment is $195.23 a month.How many loan payments must the firm make before the loan is paid in full?

Accepted Answer

A) 72 years 
B) 60 years 
C) 48 years 
D) 72 months 
E) 60 months 
A) 72 years 
B) 60 years 
C) 48 years 
D) 72 months 
E) 60 months

Question 5

Suzie just won the lottery! As her prize,she will receive $2,500 a month for 10 years.The first payment will be paid today.At 6 percent,compounded monthly,what is this prize worth to her today?

Accepted Answer

A) $224,647.53 
B) $223,940.48 
C) $224,953.46 
D) $225,183.63 
E) $226,309.55 
A) $224,647.53 
B) $223,940.48 
C) $224,953.46 
D) $225,183.63 
E) $226,309.55

Question 6

Which statement is correct regarding amortized loans with equal payments?

Accepted Answer

A) If you pay more than the scheduled amount,the additional payment will reduce the total interest paid over the life of the loan. 
B) The final loan payment will all be applied to the outstanding principal balance. 
C) The interest is paid only at loan maturity. 
D) If you pay more than the scheduled amount,the additional payment will increase the remaining principal balance. 
E) The principal portion of each payment will decrease over time. 
A) If you pay more than the scheduled amount,the additional payment will reduce the total interest paid over the life of the loan. 
B) The final loan payment will all be applied to the outstanding principal balance. 
C) The interest is paid only at loan maturity. 
D) If you pay more than the scheduled amount,the additional payment will increase the remaining principal balance. 
E) The principal portion of each payment will decrease over time.

Question 7

Investment options A and B are equally risky and have identical initial costs.Each investment will produce cash inflows of $20,000.Option A will pay $8,000 the first year followed by four annual payments of $3,000 each.Option B will pay five annual payments,starting in 1 year,of $4,000 each.Which one of the following statements is correct given these two investment options? Assume a positive rate of return.

Accepted Answer

A) Neither investment should be undertaken. 
B) Option A is the better investment. 
C) Option B has a higher net present value. 
D) Option B has a lower future value at Year 5. 
E) Both options are of equal value. 
A) Neither investment should be undertaken. 
B) Option A is the better investment. 
C) Option B has a higher net present value. 
D) Option B has a lower future value at Year 5. 
E) Both options are of equal value.

Question 8

Juniper Stores borrowed $98,000 for 5 years at an interest rate of 6.7 percent,compounded annually.The loan requires the payment of the annual interest plus $19,600 of principal each year.What is the amount of the total loan payment in Year 3?

Accepted Answer

A) $22,766.67 
B) $24,033.33 
C) $23,539.60 
D) $22,848.20 
E) $23,600.67 
A) $22,766.67 
B) $24,033.33 
C) $23,539.60 
D) $22,848.20 
E) $23,600.67

Question 9

Wings and More purchased a piece of property for $1.8 million.It paid a down payment of 20 percent in cash and financed the balance.The loan terms require monthly payments for 15 years at an annual percentage rate of 4.60 percent,compounded monthly.What is the amount of each mortgage payment?

Accepted Answer

A) $12,440.01 
B) $11,029.33 
C) $10,236.25 
D) $10,799.18 
E) $11,089.64 
A) $12,440.01 
B) $11,029.33 
C) $10,236.25 
D) $10,799.18 
E) $11,089.64

Question 10

Rita plans to save $1,500,$1,500,and $2,500 a year over the next 3 years,respectively.How much would you need to deposit in one lump sum today to have the same amount as Rita 3 years from now if you both earn 3.5 percent,compounded annually?

Accepted Answer

A) $4,857.92 
B) $5,104.40 
C) $5,491.42 
D) $6,097.95 
E) $4,434.87 
A) $4,857.92 
B) $5,104.40 
C) $5,491.42 
D) $6,097.95 
E) $4,434.87

Question 11

You have just obtained a 5-year pure discount loan in the amount of $75,000 at 6.28 percent interest,compounded monthly.What total amount will you have to repay?

Accepted Answer

A) $102,582.70 
B) $87,370.00 
C) $84,219.16 
D) $105,260.13 
E) $96,100.84 
A) $102,582.70 
B) $87,370.00 
C) $84,219.16 
D) $105,260.13 
E) $96,100.84

Question 12

The growing perpetuity present value formula assumes that

Accepted Answer

A) g = r and the time periods are limited in number. 
B) g < r and the time periods are regular and discrete. 
C) the growth rate increases as time progresses. 
D) the first cash flow occurs at Time 0. 
E) g < r and the time periods are finite. 
A) g = r and the time periods are limited in number. 
B) g < r and the time periods are regular and discrete. 
C) the growth rate increases as time progresses. 
D) the first cash flow occurs at Time 0. 
E) g < r and the time periods are finite.

Question 13

Cast Out Co.invested $37,900 in a project.At the end of three years,the company sold the project for $62,500.What annual rate of return did the firm earn on this project?

Accepted Answer

A) 16.91% 
B) 19.20% 
C) 18.14% 
D) 18.67% 
E) 17.47% 
A) 16.91% 
B) 19.20% 
C) 18.14% 
D) 18.67% 
E) 17.47%

Question 14

Walt can afford monthly car payments of $140 for 3 years,starting 1 month from now.The interest rate is 4.6 percent,compounded monthly.How much can he afford to borrow to buy a car?

Accepted Answer

A) $4,961.36 
B) $4,717.32 
C) $4,533.80 
D) $5,333.88 
E) $4,699.31 
A) $4,961.36 
B) $4,717.32 
C) $4,533.80 
D) $5,333.88 
E) $4,699.31

Question 15

Your parents have been investing $25 a week for the past 18 years into an account for you.Today,this investment account is worth $60,762.53.Interest is compounded weekly.What is the annual rate of return?

Accepted Answer

A) 8)80% 
B) 8)47% 
C) 8)16% 
D) 9)62% 
E) 9)34% 
A) 8)80% 
B) 8)47% 
C) 8)16% 
D) 9)62% 
E) 9)34%

Question 16

By federal law,lenders must disclose

Accepted Answer

A) the APR,excluding fees or other noninterest charges. 
B) the EAR,excluding fees or other noninterest charges. 
C) the APR,including fees and other noninterest charges. 
D) the EAR,including fees and other noninterest charges. 
E) both the APR and EAR,excluding fees and other charges. 
A) the APR,excluding fees or other noninterest charges. 
B) the EAR,excluding fees or other noninterest charges. 
C) the APR,including fees and other noninterest charges. 
D) the EAR,including fees and other noninterest charges. 
E) both the APR and EAR,excluding fees and other charges.

Question 17

Which statement applies to an amortized loan that requires fixed principal payments?

Accepted Answer

A) The loan payments will be either an ordinary annuity or an annuity due. 
B) The final loan payment will equal the required principal payment amount. 
C) The interest is paid only at loan maturity. 
D) The loan payments are an annuity due. 
E) The loan payments will decrease over time. 
A) The loan payments will be either an ordinary annuity or an annuity due. 
B) The final loan payment will equal the required principal payment amount. 
C) The interest is paid only at loan maturity. 
D) The loan payments are an annuity due. 
E) The loan payments will decrease over time.

Question 18

You want to make a one-time deposit today that will increase in value to $100 at the end of this year.Which rate of interest will allow you to deposit the least amount today to reach this goal?

Accepted Answer

A) 3)8% 
B) 2)6% 
C) 2)9% 
D) 3)6% 
E) 3)4% 
A) 3)8% 
B) 2)6% 
C) 2)9% 
D) 3)6% 
E) 3)4%

Question 19

The Uptown Development project is expected to provide a cash flow of $18,600 next year with annual increases of 3.5 percent for 15 years.After that,the project will be worthless.What is the present value of this project at a discount rate of 17 percent,compounded annually?

Accepted Answer

A) $251,987.56 
B) $115,875.14 
C) $103,206.07 
D) $121,008.67 
E) $247,266.41 
A) $251,987.56 
B) $115,875.14 
C) $103,206.07 
D) $121,008.67 
E) $247,266.41

Question 20

Beatrice is investing $5,000 in an account that pays 4 percent simple interest.How much more could she have earned over a period of 10 years if the interest had compounded annually?

Accepted Answer

A) $414.79 
B) $0 
C) $385.65 
D) $401.22 
E) $390.70 
A) $414.79 
B) $0 
C) $385.65 
D) $401.22 
E) $390.70

Angela expects to save $500 a year and earn an average annual return of 5.2 percent.How much will her savings be worth 35 years from now?

Tracie invested $60,000 in exchange for payments of $2,500 a year forever.What rate of return is she earning?

1 year ago,the Jenkins Center opened an investment account and deposited $5,000.Today,it is depositing an additional $6,000 and will make a final deposit of $7,500 1 year from now.How much will the firm have saved 3 years from now if it earns an average annual return of 6.5 percent?

Today,the Corner Store borrowed $11,680 at 6.3 percent,compounded monthly.The loan payment is $195.23 a month.How many loan payments must the firm make before the loan is paid in full?

Suzie just won the lottery! As her prize,she will receive $2,500 a month for 10 years.The first payment will be paid today.At 6 percent,compounded monthly,what is this prize worth to her today?

Which statement is correct regarding amortized loans with equal payments?

Juniper Stores borrowed $98,000 for 5 years at an interest rate of 6.7 percent,compounded annually.The loan requires the payment of the annual interest plus $19,600 of principal each year.What is the amount of the total loan payment in Year 3?

Wings and More purchased a piece of property for $1.8 million.It paid a down payment of 20 percent in cash and financed the balance.The loan terms require monthly payments for 15 years at an annual percentage rate of 4.60 percent,compounded monthly.What is the amount of each mortgage payment?

Rita plans to save $1,500,$1,500,and $2,500 a year over the next 3 years,respectively.How much would you need to deposit in one lump sum today to have the same amount as Rita 3 years from now if you both earn 3.5 percent,compounded annually?

You have just obtained a 5-year pure discount loan in the amount of $75,000 at 6.28 percent interest,compounded monthly.What total amount will you have to repay?

The growing perpetuity present value formula assumes that

Cast Out Co.invested $37,900 in a project.At the end of three years,the company sold the project for $62,500.What annual rate of return did the firm earn on this project?

Walt can afford monthly car payments of $140 for 3 years,starting 1 month from now.The interest rate is 4.6 percent,compounded monthly.How much can he afford to borrow to buy a car?

Your parents have been investing $25 a week for the past 18 years into an account for you.Today,this investment account is worth $60,762.53.Interest is compounded weekly.What is the annual rate of return?

By federal law,lenders must disclose

Which statement applies to an amortized loan that requires fixed principal payments?

You want to make a one-time deposit today that will increase in value to $100 at the end of this year.Which rate of interest will allow you to deposit the least amount today to reach this goal?

The Uptown Development project is expected to provide a cash flow of $18,600 next year with annual increases of 3.5 percent for 15 years.After that,the project will be worthless.What is the present value of this project at a discount rate of 17 percent,compounded annually?

Beatrice is investing $5,000 in an account that pays 4 percent simple interest.How much more could she have earned over a period of 10 years if the interest had compounded annually?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

Exam 4: Discounted Cash Flow Valuation

Angela expects to save $500 a year and earn an average annual return of 5.2 percent.How much will her savings be worth 35 years from now?

Tracie invested $60,000 in exchange for payments of $2,500 a year forever.What rate of return is she earning?

1 year ago,the Jenkins Center opened an investment account and deposited $5,000.Today,it is depositing an additional $6,000 and will make a final deposit of $7,500 1 year from now.How much will the firm have saved 3 years from now if it earns an average annual return of 6.5 percent?

Today,the Corner Store borrowed $11,680 at 6.3 percent,compounded monthly.The loan payment is $195.23 a month.How many loan payments must the firm make before the loan is paid in full?

Suzie just won the lottery! As her prize,she will receive $2,500 a month for 10 years.The first payment will be paid today.At 6 percent,compounded monthly,what is this prize worth to her today?

Which statement is correct regarding amortized loans with equal payments?

Juniper Stores borrowed $98,000 for 5 years at an interest rate of 6.7 percent,compounded annually.The loan requires the payment of the annual interest plus $19,600 of principal each year.What is the amount of the total loan payment in Year 3?

Wings and More purchased a piece of property for $1.8 million.It paid a down payment of 20 percent in cash and financed the balance.The loan terms require monthly payments for 15 years at an annual percentage rate of 4.60 percent,compounded monthly.What is the amount of each mortgage payment?

Rita plans to save $1,500,$1,500,and $2,500 a year over the next 3 years,respectively.How much would you need to deposit in one lump sum today to have the same amount as Rita 3 years from now if you both earn 3.5 percent,compounded annually?

You have just obtained a 5-year pure discount loan in the amount of $75,000 at 6.28 percent interest,compounded monthly.What total amount will you have to repay?

The growing perpetuity present value formula assumes that

Cast Out Co.invested $37,900 in a project.At the end of three years,the company sold the project for $62,500.What annual rate of return did the firm earn on this project?

Walt can afford monthly car payments of $140 for 3 years,starting 1 month from now.The interest rate is 4.6 percent,compounded monthly.How much can he afford to borrow to buy a car?

Your parents have been investing $25 a week for the past 18 years into an account for you.Today,this investment account is worth $60,762.53.Interest is compounded weekly.What is the annual rate of return?

By federal law,lenders must disclose

Which statement applies to an amortized loan that requires fixed principal payments?

You want to make a one-time deposit today that will increase in value to $100 at the end of this year.Which rate of interest will allow you to deposit the least amount today to reach this goal?

The Uptown Development project is expected to provide a cash flow of $18,600 next year with annual increases of 3.5 percent for 15 years.After that,the project will be worthless.What is the present value of this project at a discount rate of 17 percent,compounded annually?

Beatrice is investing $5,000 in an account that pays 4 percent simple interest.How much more could she have earned over a period of 10 years if the interest had compounded annually?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Interest Rates AMCQ Bomcq Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters