Question 1

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Accepted Answer

A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years 
A)  7.20 years 
B)  16.89 years 
C)  17.46 years 
D)  40.00 years

Question 2

Interest-on-Interest Consider a $1,000 deposit earning 7 percent interest per year for 4 years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

Accepted Answer

A)  $28.00 
B)  $30.00 
C)  $280.00 
D)  $310.00 
A)  $28.00 
B)  $30.00 
C)  $280.00 
D)  $310.00

Question 3

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

Accepted Answer

A)  43.09% 
B)  55.78% 
C)  76.47% 
D)  81.03% 
A)  43.09% 
B)  55.78% 
C)  76.47% 
D)  81.03%

Question 4

Rule of 72 Approximately what interest rate is needed to double an investment over 6 years?

Accepted Answer

A)  6% 
B)  12% 
C)  17% 
D)  100% 
A)  6% 
B)  12% 
C)  17% 
D)  100%

Question 5

Explain why the Rule of 72 is less accurate with higher interest rates.

Accepted Answer

"...with a 72 percent interest rate, the

Question 6

Explain how "interest rate" and "rate of return" are similar, yet different.

Accepted Answer

Both the interest rate and rate of retur

Question 7

What is the future value of $1000 deposited for one year earning 5% interest rate annually?

Accepted Answer

A)  $1000 
B)  $1005 
C)  $1050 
D)  $2050 
A)  $1000 
B)  $1005 
C)  $1050 
D)  $2050

Question 8

Solving for Rates You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

Accepted Answer

A)  -112.5%, +75%, respectively 
B)  -75%, +112.5%, respectively 
C)  -33.33%, +25%, respectively 
D)  -25%, +33.33% respectively 
A)  -112.5%, +75%, respectively 
B)  -75%, +112.5%, respectively 
C)  -33.33%, +25%, respectively 
D)  -25%, +33.33% respectively

Question 9

Solving for Rates What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year six?

Accepted Answer

A)  6.99% 
B)  14.47% 
C)  24.00% 
D)  50.00% 
A)  6.99% 
B)  14.47% 
C)  24.00% 
D)  50.00%

Question 10

A dollar paid (or received) in the future is

Accepted Answer

A)  worth more than a dollar paid (or received) today. 
B)  worth as much as a dollar paid (or received) today. 
C)  not worth as much as a dollar paid (or received) today. 
D)  not comparable to a dollar paid (or received) today. 
A)  worth more than a dollar paid (or received) today. 
B)  worth as much as a dollar paid (or received) today. 
C)  not worth as much as a dollar paid (or received) today. 
D)  not comparable to a dollar paid (or received) today.

Question 11

Show the time line for a $300 cash outlay today, a $483.15 inflow in year five, and a 10 percent interest rate.

Accepted Answer

The answer of Show the time line for a $300...

Question 12

An appliance store sells a TV for $1,200 and gives their customers a full 3 years to pay for the TV. If interest rates are 5%, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

Accepted Answer

A)  $991.72 
B)  $1,036.61 
C)  $1,104.14 
D)  $1,389.15 
A)  $991.72 
B)  $1,036.61 
C)  $1,104.14 
D)  $1,389.15

Question 13

How many years (and months) will it take $4 million to grow to $7 million with an annual interest rate of 12%?

Accepted Answer

A)  4 years and 1.92 month 
B)  4 years and 11.28 months 
C)  5 years and 6.54 months 
D)  5 years and 10.86 months 
A)  4 years and 1.92 month 
B)  4 years and 11.28 months 
C)  5 years and 6.54 months 
D)  5 years and 10.86 months

Question 14

Solving for Time How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

Accepted Answer

A)  7.00 years 
B)  7.55 years 
C)  9.52 years 
D)  10.29 years 
A)  7.00 years 
B)  7.55 years 
C)  9.52 years 
D)  10.29 years

Question 15

Rule of 72 Approximately how many years does it take to double a $300 investment when interest rates are 8% per year?

Accepted Answer

A)  .11 years 
B)  4.17 years 
C)  9 years 
D)  11 years 
A)  .11 years 
B)  4.17 years 
C)  9 years 
D)  11 years

Question 16

Which of the following will not increase a present value?

Accepted Answer

A)  Increase the interest rate. 
B)  Decrease the number of periods. 
C)  Increase the future value. 
D)  None of these answers is correct. 
A)  Increase the interest rate. 
B)  Decrease the number of periods. 
C)  Increase the future value. 
D)  None of these answers is correct.

Question 17

Present Value What is the present value of a $500 payment made in 4 years when the discount rate is 8 percent?

Accepted Answer

A)  $365.35 
B)  $367.51 
C)  $460.00 
D)  $680.24 
A)  $365.35 
B)  $367.51 
C)  $460.00 
D)  $680.24

Question 18

You deposit $20,000 in an account that doubles in 7 years. How many years will it take the account to be reduced to its original value if it loses 12% per year?

Accepted Answer

A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years 
A)  4.92 years 
B)  5.42 years 
C)  6.62 years 
D)  8.22 years

Question 19

Which of the following is the equivalent of $300 received today?

Accepted Answer

A)  $795.99 to be received 20 years in the future assuming a 5% annual interest rate. 
B)  $100 to be received two years from now and $200 three years from now. 
C)  $300 compounded at 10% for one year. 
D)  All of these are the equivalent of $300 received today. 
A)  $795.99 to be received 20 years in the future assuming a 5% annual interest rate. 
B)  $100 to be received two years from now and $200 three years from now. 
C)  $300 compounded at 10% for one year. 
D)  All of these are the equivalent of $300 received today.

Question 20

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3%?

Accepted Answer

A)  $132.89 
B)  $147.23 
C)  $152.91 
D)  $167.50 
A)  $132.89 
B)  $147.23 
C)  $152.91 
D)  $167.50

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Interest-on-Interest Consider a $1,000 deposit earning 7 percent interest per year for 4 years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

Rule of 72 Approximately what interest rate is needed to double an investment over 6 years?

Explain why the Rule of 72 is less accurate with higher interest rates.

Explain how "interest rate" and "rate of return" are similar, yet different.

What is the future value of $1000 deposited for one year earning 5% interest rate annually?

Solving for Rates You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

Solving for Rates What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year six?

A dollar paid (or received) in the future is

Show the time line for a $300 cash outlay today, a $483.15 inflow in year five, and a 10 percent interest rate.

An appliance store sells a TV for $1,200 and gives their customers a full 3 years to pay for the TV. If interest rates are 5%, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

How many years (and months) will it take $4 million to grow to $7 million with an annual interest rate of 12%?

Solving for Time How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

Rule of 72 Approximately how many years does it take to double a $300 investment when interest rates are 8% per year?

Which of the following will not increase a present value?

Present Value What is the present value of a $500 payment made in 4 years when the discount rate is 8 percent?

You deposit $20,000 in an account that doubles in 7 years. How many years will it take the account to be reduced to its original value if it loses 12% per year?

Which of the following is the equivalent of $300 received today?

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3%?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

Solving for Time How long will it take $100 to reach $500 when it grows at 10 percent per year?

Interest-on-Interest Consider a $1,000 deposit earning 7 percent interest per year for 4 years. How much total interest is earned on the original deposit (excluding interest earned on interest)?

Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

Rule of 72 Approximately what interest rate is needed to double an investment over 6 years?

Explain why the Rule of 72 is less accurate with higher interest rates.

Explain how "interest rate" and "rate of return" are similar, yet different.

What is the future value of $1000 deposited for one year earning 5% interest rate annually?

Solving for Rates You invested $1,000 in the stock market one year ago. Today, the investment is valued at $750. What return did you earn? What return would you need to get next year to break even overall?

Solving for Rates What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year six?

A dollar paid (or received) in the future is

Show the time line for a $300 cash outlay today, a $483.15 inflow in year five, and a 10 percent interest rate.

An appliance store sells a TV for $1,200 and gives their customers a full 3 years to pay for the TV. If interest rates are 5%, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

How many years (and months) will it take $4 million to grow to $7 million with an annual interest rate of 12%?

Solving for Time How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?

Rule of 72 Approximately how many years does it take to double a $300 investment when interest rates are 8% per year?

Which of the following will not increase a present value?

Present Value What is the present value of a $500 payment made in 4 years when the discount rate is 8 percent?

You deposit $20,000 in an account that doubles in 7 years. How many years will it take the account to be reduced to its original value if it loses 12% per year?

Which of the following is the equivalent of $300 received today?

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3%?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 2: Analyzing Annuity Cash Flows

Understanding Financial Markets and Institutions

Valuing Bonds

Valuing Stocks

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital Management and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, Equity, and Capital Structure

Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters