Question 1

What is the interest rate of a 4-year, annual $1,000 annuity with present value of $3,500?

Accepted Answer

A) 3.85 percent 
B) 5.56 percent 
C) 8.84 percent 
D) 9.70 percent 
A) 3.85 percent 
B) 5.56 percent 
C) 8.84 percent 
D) 9.70 percent

Question 2

What is the present value of a $500 deposit in year 1 and another $100 deposit at the end of year 4 if interest rates are 5 percent?

Accepted Answer

A) $480.00 
B) $493.62 
C) $558.46 
D) $582.27 
A) $480.00 
B) $493.62 
C) $558.46 
D) $582.27

Question 3

After saving diligently your entire career, you and your spouse are ready to retire with a nest egg of $600,000. You need to invest this money in a mix of stocks and bonds that will allow you to earn $5,000 per month for 30 years. What annual interest rate (APR) do you need to earn?

Accepted Answer

A) 9.40 percent 
B) 10.13 percent 
C) 8.37 percent 
D) 9.61 percent 
A) 9.40 percent 
B) 10.13 percent 
C) 8.37 percent 
D) 9.61 percent

Question 4

A perpetuity pays $50 per year and interest rates are 9 percent. How much would its value change if interest rates decreased to 6 percent?

Accepted Answer

A) $150.00 increase 
B) $150.00 decrease 
C) $277.78 increase 
D) $277.78 decrease 
A) $150.00 increase 
B) $150.00 decrease 
C) $277.78 increase 
D) $277.78 decrease

Question 5

Jane has been saving $200 in her retirement account each month for the last 20 years and plans to continue contributing $200 each month for the next 20 years. Her account has been earning an 8 percent annual interest rate and she expects to earn the same rate for the next 20 years. Her twin brother, Hal, has not saved anything for the last 20 years. Due to sibling rivalry, he wants to have as much as Jane is expected to have at the end of 20 years. If Hal expects to earn the same annual interest rate as Jane, how much must Hal save each month to achieve his goal?

Accepted Answer

A) $400.00 
B) $1,185.36 
C) $1,569.85 
D) $2,909.17 
A) $400.00 
B) $1,185.36 
C) $1,569.85 
D) $2,909.17

Question 6

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent?

Accepted Answer

A) $11,100 
B) $21,089.37 
C) $22,963.14 
D) $24,444.44 
A) $11,100 
B) $21,089.37 
C) $22,963.14 
D) $24,444.44

Question 7

What annual interest rate would you need to earn if you wanted a $200 per month contribution to grow to $14,700 in five years?

Accepted Answer

A) 6.47 percent 
B) 7.76 percent 
C) 8.01 percent 
D) 14.70 percent 
A) 6.47 percent 
B) 7.76 percent 
C) 8.01 percent 
D) 14.70 percent

What is the interest rate of a 4-year, annual $1,000 annuity with present value of $3,500?

What is the present value of a $500 deposit in year 1 and another $100 deposit at the end of year 4 if interest rates are 5 percent?

After saving diligently your entire career, you and your spouse are ready to retire with a nest egg of $600,000. You need to invest this money in a mix of stocks and bonds that will allow you to earn $5,000 per month for 30 years. What annual interest rate (APR) do you need to earn?

A perpetuity pays $50 per year and interest rates are 9 percent. How much would its value change if interest rates decreased to 6 percent?

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent?

What annual interest rate would you need to earn if you wanted a $200 per month contribution to grow to $14,700 in five years?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single 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

Filters

Exam 5: Time Value of Money 2: Analyzing Annuity Cash Flows

What is the interest rate of a 4-year, annual $1,000 annuity with present value of $3,500?

What is the present value of a $500 deposit in year 1 and another $100 deposit at the end of year 4 if interest rates are 5 percent?

After saving diligently your entire career, you and your spouse are ready to retire with a nest egg of $600,000. You need to invest this money in a mix of stocks and bonds that will allow you to earn $5,000 per month for 30 years. What annual interest rate (APR) do you need to earn?

A perpetuity pays $50 per year and interest rates are 9 percent. How much would its value change if interest rates decreased to 6 percent?

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent?

What annual interest rate would you need to earn if you wanted a $200 per month contribution to grow to $14,700 in five years?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money 1: Analyzing Single 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

Filters