Question 1

A money multiplier certificate is selling for $8,000 today and promises to be worth $10,000 in 3 years. What is the rate of return on this investment?

Accepted Answer

A)   7.17%
B)   19.28%
C)   7.72%
D)   11.93% C

Question 2

The Moose Lodge can afford to pay $12,000 at the end of each of the next 30 years to repay a mortgage on their hotel property. If the interest rate is 5.50%, what is the most The Moose Lodge can borrow?

Accepted Answer

A)   $174,404.94
B)   $869,225.74
C)   $218,181.82
D)   $360,000.00 A

Question 3

The impact of the accounting scandals that have taken place was

Accepted Answer

A)   to prove that all audits are just about worthless.
B)   increased investor scrutiny regarding financial statements and the audit process.
C)   to eliminate the need for accountants from the financial reporting process.
D)   such that accountants can no longer use estimates when compiling financial statements. B

Question 4

What is the future value of $1,500 invested at a 5% rate for 7 years?

Accepted Answer

A)   $2,103.83
B)   $1,066.02
C)   $12,213.01
D)   $2,110.65

Question 5

The correlation coefficient ranges from -1.0 to +1.0.

Accepted Answer

A) True 
 B)False

Question 6

What is the present value of $7,500 to be received in 8 years if 6% is the proper discount rate?

Accepted Answer

A)   $46,573.45
B)   $4,705.59
C)   $4,726.27
D)   $11,953.86

Question 7

You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?

Accepted Answer

A)   $132,748.33
B)   $23,307.17
C)   10,854.87
D)   $126,498.08

Exam 4: Time Value of Money, Relationship Between Risk and Return, Review of Financial Statements and Selected Ratios