Question 1

If Art wants $35,000 in 10 years and can earn a 12% interest rate,how much does he need to invest today?

Accepted Answer

A)  $10,538 
B)  $10,310 
C)  $11,270 
D)  $14,375 
A)  $10,538 
B)  $10,310 
C)  $11,270 
D)  $14,375

Question 2

Use the data in table 3.1 to answer the following question(s):
   Table 3.1
-Refer to Table 3.1 above.How much will you need to deposit today in an account paying 7% if you wish to have $1,000 in 5 years?

Accepted Answer

A)  $1,403 
B)  $713 
C)  $5,751 
D)  $4,100 
A)  $1,403 
B)  $713 
C)  $5,751 
D)  $4,100

Question 3

Which of the following decisions would involve the use of the future value of $1?

Accepted Answer

A)  Your brother buys your car and offers to pay you $500 now or $1,500 in two years. 
B)  You win a lawsuit and are offered a lump-sum payment today of $100,000 or $15,000 a year for 20 years. 
C)  Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a $7,000 cruise when you graduate from college in 4 years. 
D)  You want to have $1,000,000 in order to retire at age 55, but need to know how much you will need to deposit each year from now until your 55th birthday. 
A)  Your brother buys your car and offers to pay you $500 now or $1,500 in two years. 
B)  You win a lawsuit and are offered a lump-sum payment today of $100,000 or $15,000 a year for 20 years. 
C)  Your father and mother wish to deposit enough money on the date of your high school graduation to enable you to take a $7,000 cruise when you graduate from college in 4 years. 
D)  You want to have $1,000,000 in order to retire at age 55, but need to know how much you will need to deposit each year from now until your 55th birthday.

Question 4

Future and present values are dependent upon all of the following except

Accepted Answer

A)  time. 
B)  the interest rate. 
C)  a present or future value interest factor, depending on the problem. 
D)  annual income. 
A)  time. 
B)  the interest rate. 
C)  a present or future value interest factor, depending on the problem. 
D)  annual income.

Question 5

The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________.

Accepted Answer

The answer of The concept that a dollar received today...

Question 6

The difference between an ordinary annuity and an annuity due is that with an annuity due the payments occur at the ________ of each period.

Accepted Answer

The answer of The difference between an ordinary annuity and...

Question 7

Which stream of cash flows is not an example of an annuity?

Accepted Answer

A)  Fixed rate mortgage payment 
B)  Mortgage payment where the interest rate is reset annually 
C)  48 month car payment 
D)  Interest payment on a 10 year Treasury bond 
A)  Fixed rate mortgage payment 
B)  Mortgage payment where the interest rate is reset annually 
C)  48 month car payment 
D)  Interest payment on a 10 year Treasury bond

Question 8

How much must you invest today at 8% interest in order to see your investment grow to $15,000 in 10 years?

Accepted Answer

A)  $6,330 
B)  $6,945 
C)  $7,620 
D)  $7,500 
A)  $6,330 
B)  $6,945 
C)  $7,620 
D)  $7,500

Question 9

The same tables can be used to figure future values and present values of $1.

Accepted Answer

A) True 
 B)False

Question 10

An ordinary annuity can be defined as

Accepted Answer

A)  a series of unequal payments received or paid at equal intervals at the beginning of each period. 
B)  a series of equal payments received or paid at equal intervals of time at the end of each period. 
C)  a lump sum. 
D)  intermittent payments for ordinary expenses. 
A)  a series of unequal payments received or paid at equal intervals at the beginning of each period. 
B)  a series of equal payments received or paid at equal intervals of time at the end of each period. 
C)  a lump sum. 
D)  intermittent payments for ordinary expenses.

Question 11

The process of obtaining present values is known as discounting.

Accepted Answer

A) True 
 B)False

Question 12

The concept of the time value of money is based on

Accepted Answer

A)  the level of unemployment. 
B)  taxes. 
C)  interest earned over time 
D)  the Dow Jones Industrial Average. 
A)  the level of unemployment. 
B)  taxes. 
C)  interest earned over time 
D)  the Dow Jones Industrial Average.

Question 13

Assume you owe a large balance on your credit card and only pay the monthly minimum payment equal to 1% of the balance.If the annual interest rate on the credit card is 18%,how many years will it take you to pay off the balance assuming you do not make any additional charges to the card?

Accepted Answer

A)  7.8 years 
B)  5 years 
C)  you will never pay off the balance 
D)  not enough information is provided to determine the time 
A)  7.8 years 
B)  5 years 
C)  you will never pay off the balance 
D)  not enough information is provided to determine the time

Question 14

The future value of your savings and debt affect all of the following except which of the following?

Accepted Answer

A)  Financial planning tools 
B)  Protecting your wealth 
C)  Liquidity management 
D)  Marketing management 
A)  Financial planning tools 
B)  Protecting your wealth 
C)  Liquidity management 
D)  Marketing management

Question 15

Sandy wants to know how much she needs to save today to have $5,000 in five years at a 7% interest rate.Which of the following tables should she use?

Accepted Answer

A)  Present value of $1 
B)  Present value of an ordinary annuity 
C)  Future value of $1 
D)  Future value of an ordinary annuity 
A)  Present value of $1 
B)  Present value of an ordinary annuity 
C)  Future value of $1 
D)  Future value of an ordinary annuity

Question 16

Jerry wants to know how much he needs to save every year to accumulate $15,000 in five years at a 10% interest rate.Which of the following tables should he use?

Accepted Answer

A)  Present value of $1 
B)  Present value of an ordinary annuity 
C)  Future value of $1 
D)  Future value of an ordinary annuity 
A)  Present value of $1 
B)  Present value of an ordinary annuity 
C)  Future value of $1 
D)  Future value of an ordinary annuity

Question 17

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

Accepted Answer

A)  more than 
B)  less than 
C)  the same as 
D)  Insufficient data to determine the answer. 
A)  more than 
B)  less than 
C)  the same as 
D)  Insufficient data to determine the answer.

Question 18

The cash flows of an annuity due occur at the beginning of each period.

Accepted Answer

A) True 
 B)False

Question 19

To save for her newborn son's college education,Kelli Peterson will invest $1,500 at the end of each year for the next 18 years.The interest rate she expects to earn on her investment is 9%.How much money will she have saved by the time her son turns 18?

Accepted Answer

A)  $55,461 
B)  $69,027 
C)  $61,952 
D)  $68,399 
A)  $55,461 
B)  $69,027 
C)  $61,952 
D)  $68,399

Question 20

Compare using the present value,future value,and annuity tables to using your financial calculator to solve problems.What are some of the advantages and disadvantages of each tool?

Accepted Answer

The tables require you to carefully look

Exam 3: Applying Time Value Concepts

If Art wants $35,000 in 10 years and can earn a 12% interest rate,how much does he need to invest today?

Use the data in table 3.1 to answer the following question(s): Table 3.1 -Refer to Table 3.1 above.How much will you need to deposit today in an account paying 7% if you wish to have $1,000 in 5 years?

Which of the following decisions would involve the use of the future value of $1?

Future and present values are dependent upon all of the following except

The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________.

The difference between an ordinary annuity and an annuity due is that with an annuity due the payments occur at the ________ of each period.

Which stream of cash flows is not an example of an annuity?

How much must you invest today at 8% interest in order to see your investment grow to $15,000 in 10 years?

The same tables can be used to figure future values and present values of $1.

An ordinary annuity can be defined as

The process of obtaining present values is known as discounting.

The concept of the time value of money is based on

Assume you owe a large balance on your credit card and only pay the monthly minimum payment equal to 1% of the balance.If the annual interest rate on the credit card is 18%,how many years will it take you to pay off the balance assuming you do not make any additional charges to the card?

The future value of your savings and debt affect all of the following except which of the following?

Sandy wants to know how much she needs to save today to have $5,000 in five years at a 7% interest rate.Which of the following tables should she use?

Jerry wants to know how much he needs to save every year to accumulate $15,000 in five years at a 10% interest rate.Which of the following tables should he use?

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

The cash flows of an annuity due occur at the beginning of each period.

To save for her newborn son's college education,Kelli Peterson will invest $1,500 at the end of each year for the next 18 years.The interest rate she expects to earn on her investment is 9%.How much money will she have saved by the time her son turns 18?

Compare using the present value,future value,and annuity tables to using your financial calculator to solve problems.What are some of the advantages and disadvantages of each tool?

Overview of a Financial Plan

Planning With Personal Financial Statements

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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