Question 1

You wish to borrow $12,000 to be repaid in 60 monthly installments of $257.93.The annual interest rate is:

Accepted Answer

A) 10.50%. 
B) 12.75%. 
C) 15.25%. 
D) 6.50%. 
E) 8.80%. 
A) 10.50%. 
B) 12.75%. 
C) 15.25%. 
D) 6.50%. 
E) 8.80%.

Question 2

As a part of your savings plan at work,you have been depositing $250 per quarter in a savings account earning 8% interest compounded quarterly for the last 10 years.You will retire in 15 years and want to increase your contribution each year from $1,000 to $2,000 per year,by increasing your contribution every four months from $250 to $500.Additionally,you have just inherited $10,000,which you plan to invest now to earn interest at 12% compounded annually for the next 15 years.How much money will you have in savings when you retire 15 years from now?

Accepted Answer

A) $126,862 
B) $73,012 
C) $161,307 
D) $194,415 
A) $126,862 
B) $73,012 
C) $161,307 
D) $194,415

Question 3

Consider the following cash flows:  
What is the value on 1/1/05 of the above cash flows? Use an 8% discount rate,and round your answer to the nearest $10.

Accepted Answer

A) $600 
B) $620 
C) $630 
D) $650 
A) $600 
B) $620 
C) $630 
D) $650

Question 4

You are planning to deposit $10,000 today into a bank account.Five years from today you expect to withdraw $7,500.If the account pays 5% interest per year,how much will remain in the account eight years from today?

Accepted Answer

The answer of You are planning to deposit $10,000 today...

Question 5

You want to travel to Europe to visit relatives when you graduate from college three years from now.The trip is expected to cost a total of $10,000.Your parents have deposited $5,000 for you in a CD paying 6% interest annually,maturing three years from now.Aunt Hilda has agreed to finance the balance.If you are going to put Aunt Hilda's gift in an investment earning 10% annually over the next three years,how much must she deposit now so you can visit your relatives in three years?

Accepted Answer

A) $3,757 
B) $3,039 
C) $3,801 
D) $3,345 
A) $3,757 
B) $3,039 
C) $3,801 
D) $3,345

Question 6

What is the present value of $250 received at the beginning of each year for 21 years? Assume that the first payment is received today.Use a discount rate of 12%,and round your answer to the nearest $10.

Accepted Answer

A) $1,870 
B) $2,090 
C) $2,117 
D) $3,243 
A) $1,870 
B) $2,090 
C) $2,117 
D) $3,243

Question 7

You have borrowed $70,000 to buy rental property.You plan to make monthly payments over a 15-year period.The bank has offered you a 9% interest rate compounded monthly.Calculate the principal paid to the bank in month two of the loan.Assume end-of-period payments.

Accepted Answer

A) $184.01 
B) $186.38 
C) $188.46 
D) $190.64 
E) $192.73 
A) $184.01 
B) $186.38 
C) $188.46 
D) $190.64 
E) $192.73

Question 8

You have been depositing money at the end of each year into an account drawing 8% interest.What is the balance in the account at the end of year four if you deposited the following amounts?

Accepted Answer

A) $1,622 
B) $2,207 
C) $2,384 
D) $2,687 
A) $1,622 
B) $2,207 
C) $2,384 
D) $2,687

Question 9

Harry just bought a new four-wheel-drive Jeep Cherokee for his lumber business.The price of the vehicle was $35,000,of which he made a $5,000 down payment and took out an amortized loan for the rest.His local bank made the loan at 12% interest for five years.He is to pay back the principal and interest in five equal annual installments beginning one year from now.Determine the amount of Harry's annual payment.

Accepted Answer

A) $8,322 
B) $9,600 
C) $9,709 
D) $6,720 
A) $8,322 
B) $9,600 
C) $9,709 
D) $6,720

Question 10

Holding all other variables constant,payment per period for an annuity due will be higher than an ordinary annuity.

Accepted Answer

A) True 
 B)False

Question 11

How much money will be in the account at the end of year 40 (round to the nearest $1,000)?

Accepted Answer

A) $77,000 
B) $86,000 
C) $69,000 
D) $93,000 
A) $77,000 
B) $86,000 
C) $69,000 
D) $93,000

Question 12

The present value of a perpetuity decreases when the ________ decreases.

Accepted Answer

A) number of investment periods 
B) annual discount rate 
C) perpetuity payment 
D) both B and C 
A) number of investment periods 
B) annual discount rate 
C) perpetuity payment 
D) both B and C

Question 13

You wish to purchase a condo at a cost of $175,000.You are able to make a down payment of $35,000 and will borrow $140,000 for 30 years at an interest rate of 7.25%.How much is your monthly payment?

Accepted Answer

A) $650 
B) $955 
C) $1,092 
D) $1,023 
E) $875 
A) $650 
B) $955 
C) $1,092 
D) $1,023 
E) $875

Question 14

You are considering the purchase of XYZ Company's perpetual preferred stock which pays a perpetual annual dividend of $8 per share.If the appropriate discount rate for this investment is 14%,what is the price of one share of this stock?

Accepted Answer

A) $7.02 
B) $57.14 
C) $36.43 
D) Cannot be determined without maturity date 
A) $7.02 
B) $57.14 
C) $36.43 
D) Cannot be determined without maturity date

Question 15

The present value of a $100 perpetuity discounted at 5% is $1200.

Accepted Answer

A) True 
 B)False

Question 16

You buy a race horse,which has a winning streak for four years,bringing in $500,000 per year,and then it dies of a heart attack.If you paid $1,518,675 for the horse four years ago,what was your annual return over this four-year period?

Accepted Answer

A) 8% 
B) 33% 
C) 18% 
D) 12% 
A) 8% 
B) 33% 
C) 18% 
D) 12%

Question 17

An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if our opportunity rate is 5%?

Accepted Answer

A) $735 
B) $865 
C) $885 
D) $900 
A) $735 
B) $865 
C) $885 
D) $900

Question 18

Harold Hawkins bought a home for $320,000.He made a down payment of $45,000;the balance will be paid off over 30 years at a 6.775% rate of interest.How much will Harold's monthly payments be? Round off to the nearest $1.

Accepted Answer

A) $1,450 
B) $1,788 
C) $3,200 
D) $1,682 
A) $1,450 
B) $1,788 
C) $3,200 
D) $1,682

Question 19

A loan amortization schedule provides a breakdown of loan payments into principal and interest payments.

Accepted Answer

A) True 
 B)False

Question 20

Charlie Stone wants to retire in 30 years,and he wants to have an annuity of $1,000 a year for 20 years after retirement.Charlie wants to receive the first annuity payment at the end of the 30th year.Using an interest rate of 10%,how much must Charlie invest today in order to have his retirement annuity (round to the nearest $10)?

Accepted Answer

A) $500 
B) $490 
C) $540 
D) $570 
A) $500 
B) $490 
C) $540 
D) $570

You wish to borrow $12,000 to be repaid in 60 monthly installments of $257.93.The annual interest rate is:

Consider the following cash flows: What is the value on 1/1/05 of the above cash flows? Use an 8% discount rate,and round your answer to the nearest $10.

You are planning to deposit $10,000 today into a bank account.Five years from today you expect to withdraw $7,500.If the account pays 5% interest per year,how much will remain in the account eight years from today?

What is the present value of $250 received at the beginning of each year for 21 years? Assume that the first payment is received today.Use a discount rate of 12%,and round your answer to the nearest $10.

You have borrowed $70,000 to buy rental property.You plan to make monthly payments over a 15-year period.The bank has offered you a 9% interest rate compounded monthly.Calculate the principal paid to the bank in month two of the loan.Assume end-of-period payments.

You have been depositing money at the end of each year into an account drawing 8% interest.What is the balance in the account at the end of year four if you deposited the following amounts?

Holding all other variables constant,payment per period for an annuity due will be higher than an ordinary annuity.

How much money will be in the account at the end of year 40 (round to the nearest $1,000)?

The present value of a perpetuity decreases when the ________ decreases.

You wish to purchase a condo at a cost of $175,000.You are able to make a down payment of $35,000 and will borrow $140,000 for 30 years at an interest rate of 7.25%.How much is your monthly payment?

You are considering the purchase of XYZ Company's perpetual preferred stock which pays a perpetual annual dividend of $8 per share.If the appropriate discount rate for this investment is 14%,what is the price of one share of this stock?

The present value of a $100 perpetuity discounted at 5% is $1200.

You buy a race horse,which has a winning streak for four years,bringing in $500,000 per year,and then it dies of a heart attack.If you paid $1,518,675 for the horse four years ago,what was your annual return over this four-year period?

An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if our opportunity rate is 5%?

Harold Hawkins bought a home for $320,000.He made a down payment of $45,000;the balance will be paid off over 30 years at a 6.775% rate of interest.How much will Harold's monthly payments be? Round off to the nearest $1.

A loan amortization schedule provides a breakdown of loan payments into principal and interest payments.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

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Exam 6: The Time Value of Money-Annuities and Other Topics

You wish to borrow $12,000 to be repaid in 60 monthly installments of $257.93.The annual interest rate is:

Consider the following cash flows: What is the value on 1/1/05 of the above cash flows? Use an 8% discount rate,and round your answer to the nearest $10.

You are planning to deposit $10,000 today into a bank account.Five years from today you expect to withdraw $7,500.If the account pays 5% interest per year,how much will remain in the account eight years from today?

What is the present value of $250 received at the beginning of each year for 21 years? Assume that the first payment is received today.Use a discount rate of 12%,and round your answer to the nearest $10.

You have borrowed $70,000 to buy rental property.You plan to make monthly payments over a 15-year period.The bank has offered you a 9% interest rate compounded monthly.Calculate the principal paid to the bank in month two of the loan.Assume end-of-period payments.

You have been depositing money at the end of each year into an account drawing 8% interest.What is the balance in the account at the end of year four if you deposited the following amounts?

Holding all other variables constant,payment per period for an annuity due will be higher than an ordinary annuity.

How much money will be in the account at the end of year 40 (round to the nearest $1,000)?

The present value of a perpetuity decreases when the ________ decreases.

You wish to purchase a condo at a cost of $175,000.You are able to make a down payment of $35,000 and will borrow $140,000 for 30 years at an interest rate of 7.25%.How much is your monthly payment?

You are considering the purchase of XYZ Company's perpetual preferred stock which pays a perpetual annual dividend of $8 per share.If the appropriate discount rate for this investment is 14%,what is the price of one share of this stock?

The present value of a $100 perpetuity discounted at 5% is $1200.

You buy a race horse,which has a winning streak for four years,bringing in $500,000 per year,and then it dies of a heart attack.If you paid $1,518,675 for the horse four years ago,what was your annual return over this four-year period?

An investment is expected to yield $300 in three years,$500 in five years,and $300 in seven years.What is the present value of this investment if our opportunity rate is 5%?

Harold Hawkins bought a home for $320,000.He made a down payment of $45,000;the balance will be paid off over 30 years at a 6.775% rate of interest.How much will Harold's monthly payments be? Round off to the nearest $1.

A loan amortization schedule provides a breakdown of loan payments into principal and interest payments.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters