Question 1

In general,a dollar can typically buy more today than it can in one year.

Accepted Answer

A) True 
 B)False

Question 2

Time value of money computations relate to the future value of lump-sum cash flows only.

Accepted Answer

A) True 
 B)False

Question 3

Aaron wants to put $200 per month into an individual retirement account at 15% for four years.What is he solving for using his financial calculator?

Accepted Answer

A)  Present value 
B)  Future value 
C)  Interest rate 
D)  Payment 
A)  Present value 
B)  Future value 
C)  Interest rate 
D)  Payment

Question 4

Money received today is worth more than the same amount of money received in the future.This is true because

Accepted Answer

A)  money received today can grow at a compounded rate. 
B)  future inflation will devalue your current investments. 
C)  all goods and services will cost more in the future. 
D)  unique investment opportunities exist today, which may not be available in the future. 
A)  money received today can grow at a compounded rate. 
B)  future inflation will devalue your current investments. 
C)  all goods and services will cost more in the future. 
D)  unique investment opportunities exist today, which may not be available in the future.

Question 5

An annuity due differs from an ordinary annuity in that the payments occur at the beginning of the period instead of at the end of the period.

Accepted Answer

A) True 
 B)False

Question 6

Time value of money is only applied to single dollar amounts.

Accepted Answer

A) True 
 B)False

Question 7

To compute how much you would need to save each year for the next 25 years to allow you to withdraw $20,000 for the following 30 years,you would need to use

Accepted Answer

A)  the future value of an annuity. 
B)  the present value of an annuity. 
C)  both future and present value of an annuity. 
D)  both present and future value of $1. 
A)  the future value of an annuity. 
B)  the present value of an annuity. 
C)  both future and present value of an annuity. 
D)  both present and future value of $1.

Question 8

Time value of money is important because

Accepted Answer

A)  you do not want to wait a long time to get paid. 
B)  deflation eats away at the value of a dollar. 
C)  the present value of future cash flows is affected by inflation. 
D)  time value of money is not as important to a person's finances as budgeting. 
A)  you do not want to wait a long time to get paid. 
B)  deflation eats away at the value of a dollar. 
C)  the present value of future cash flows is affected by inflation. 
D)  time value of money is not as important to a person's finances as budgeting.

Question 9

Describe how present and future values concepts apply to your income and expenses and ultimately your personal budget,income statement,and balance sheet.

Accepted Answer

This is basically a subjective answer.Pr

Question 10

When money earns interest on interest,it is said to be compounding.

Accepted Answer

A) True 
 B)False

Question 11

The time period over which you save money has very little impact on its growth.

Accepted Answer

A) True 
 B)False

Question 12

The periodic interest rate,the number of periods in which your money will be invested,and the initial payment amount,must be known to estimate the future value using a financial calculator.

Accepted Answer

A) True 
 B)False

Question 13

Yogi Berra Jr.has agreed to play for the New York Mets for $4 million per year for the next 10 years.What table would you use to calculate the value of this contract in today's dollars?

Accepted Answer

A)  Present value of a single amount 
B)  Future value of an annuity 
C)  Future value of a single amount 
D)  Present value of an annuity 
A)  Present value of a single amount 
B)  Future value of an annuity 
C)  Future value of a single amount 
D)  Present value of an annuity

Question 14

If Joe has $5,600 today and invests it at a 10% interest rate,how much will he have in 12 years? (Note-Solve as a future value problem.)

Accepted Answer

A)  $17,393.60 
B)  $17,572.80 
C)  $15,770.49 
D)  $12,320.00 
A)  $17,393.60 
B)  $17,572.80 
C)  $15,770.49 
D)  $12,320.00

Question 15

To determine how much you would need to save each year to reach a specific goal,you would use

Accepted Answer

A)  present value of $1. 
B)  future value of $1. 
C)  present value of an annuity. 
D)  future value of an annuity. 
A)  present value of $1. 
B)  future value of $1. 
C)  present value of an annuity. 
D)  future value of an annuity.

Question 16

Use the following two columns of items to answer the matching questions below:
-annuity

Accepted Answer

A) the process of earning interest on interest 
B) a series of equal payments received or paid at equal intervals 
C) a factor multiplied by today's savings to determine how the savings will accumulate over time 
D) a business calculator that performs PV/FV calculations 
A) the process of earning interest on interest 
B) a series of equal payments received or paid at equal intervals 
C) a factor multiplied by today's savings to determine how the savings will accumulate over time 
D) a business calculator that performs PV/FV calculations

Question 17

Which of the following decisions is not financially sound?

Accepted Answer

A)  Defer your student loan payments with no interest accruing 
B)  Defer your student loan payments if the interest rate is 7% per annum 
C)  Take a 60 month zero interest rate car loan 
D)  Prioritize paying off the highest interest rate loans versus lower rate loans 
A)  Defer your student loan payments with no interest accruing 
B)  Defer your student loan payments if the interest rate is 7% per annum 
C)  Take a 60 month zero interest rate car loan 
D)  Prioritize paying off the highest interest rate loans versus lower rate loans

Question 18

You utilize present and future value concepts in investment,purchase,and retirement decisions.

Accepted Answer

A) True 
 B)False

Question 19

The process of obtaining present values is known as compounding.

Accepted Answer

A) True 
 B)False

Question 20

The ________ the interest rate,the ________ the present value of an annuity.

Accepted Answer

A)  higher; lower 
B)  lower; lower 
C)  higher; higher 
D)  Interest rates do not affect the present value of an annuity. 
A)  higher; lower 
B)  lower; lower 
C)  higher; higher 
D)  Interest rates do not affect the present value of an annuity.

Exam 3: Applying Time Value Concepts

In general,a dollar can typically buy more today than it can in one year.

Time value of money computations relate to the future value of lump-sum cash flows only.

Aaron wants to put $200 per month into an individual retirement account at 15% for four years.What is he solving for using his financial calculator?

Money received today is worth more than the same amount of money received in the future.This is true because

An annuity due differs from an ordinary annuity in that the payments occur at the beginning of the period instead of at the end of the period.

Time value of money is only applied to single dollar amounts.

To compute how much you would need to save each year for the next 25 years to allow you to withdraw $20,000 for the following 30 years,you would need to use

Time value of money is important because

Describe how present and future values concepts apply to your income and expenses and ultimately your personal budget,income statement,and balance sheet.

When money earns interest on interest,it is said to be compounding.

The time period over which you save money has very little impact on its growth.

The periodic interest rate,the number of periods in which your money will be invested,and the initial payment amount,must be known to estimate the future value using a financial calculator.

Yogi Berra Jr.has agreed to play for the New York Mets for $4 million per year for the next 10 years.What table would you use to calculate the value of this contract in today's dollars?

If Joe has $5,600 today and invests it at a 10% interest rate,how much will he have in 12 years? (Note-Solve as a future value problem.)

To determine how much you would need to save each year to reach a specific goal,you would use

Use the following two columns of items to answer the matching questions below: -annuity

Which of the following decisions is not financially sound?

You utilize present and future value concepts in investment,purchase,and retirement decisions.

The process of obtaining present values is known as compounding.

The ________ the interest rate,the ________ the present value of an annuity.

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

Filters

The the interest rate,the the present value of an annuity.