Question 1

You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years?

Accepted Answer

A)  $500(1.05) 2 + $500/(1.05) 2
B)  $500(1.05) 2 + $500
C)  $500 + $500/(1.05) 2
D)  $500 + $500E) B) and C)
F) A) and B)

Question 2

What is the future value of $800 one year from today if the interest rate is 7 percent?

Accepted Answer

A)  $747.66
B)  $756.00
C)  $856.00
D)  None of the above are correct to the nearest cent.E) B) and D)
F) A) and D)

Question 3

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest,and at the end of the N years you have $4,082.59.What is the number of years,N?

Accepted Answer

A)  4
B)  5
C)  6
D)  7E) None of the above
F) All of the above

Question 4

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3 percent.The future value of the $500 after 1 year is

Accepted Answer

A)  $485.44.
B)  $496.50.
C)  $509.28.
D)  $515.00.E) A) and B)
F) A) and D)

Question 5

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

Accepted Answer

A)  3 percent
B)  5 percent
C)  7 percent
D)  9 percentE) A) and B)
F) A) and C)

Question 6

Which,if any,of the present values below are computed correctly?

Accepted Answer

A)  A payment of $100 to be received one year from today,with a 2 percent interest rate,has a present value of $98.81.
B)  A payment of $200 to be received two years from today,with a 3 percent interest rate,has a present value of $188.52.
C)  A payment of $300 to be received three years from today,with a 4 percent interest rate,has a present value of $234.34.
D)  None of the above are correct to the nearest cent.E) None of the above
F) A) and B)

Question 7

The K-Nine dog food company is considering the purchase of additional canning equipment.They expect that adding the equipment will yield $200,000 at the end of the first year and $250,000 at the end of the second year and then nothing after that.At which of the following prices and interest rates would K-Nine buy the equipment?

Accepted Answer

A)  $415,000 if the interest rate is 5%
B)  $419,000 if the interest rate is 4%
C)  K-Nine would buy the equipment in both cases.
D)  K-Nine would not buy the equipment in either case.E) A) and B)
F) A) and C)

Question 8

A firm has three different investment options.Option A will give the firm $10 million at the end of one year,$10 million at the end of two years,and $10 million at the end of three years.Option B will give the firm $15 million at the end of one year,$10 million at the end of two years,and $5 million at the end of three years.Option C will give the firm $30 million at the end of one year,and nothing thereafter.Which of these options has the highest present value?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  The answer depends on the rate of interest,which is not specified here.E) A) and D)
F) B) and C)

Question 9

You are better off choosing $100 today rather than $200 in 9 years if the interest rate is

Accepted Answer

A)  lower than about 8 percent.
B)  higher than about 8 percent.
C)  lower than about 10 percent.
D)  higher than about 10 percent.E) A) and D)
F) B) and C)

Question 10

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3%.The future value of the $500 in 5 years to the nearest cent is

Accepted Answer

A)  $575.00
B)  $578.81
C)  $579.64
D)  None of the above is correct.E) A) and C)
F) B) and C)

Question 11

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Accepted Answer

A)  $95.50
B)  $95.24
C)  $95.00
D)  None of the above are correct to the nearest cent.E) B) and C)
F) A) and C)

Question 12

The future value of a deposit in a savings account will be larger

Accepted Answer

A)  the longer a person waits to withdraw the funds.
B)  the higher the interest rate is.
C)  the larger the initial deposit is.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 13

What is the future value of $450 at an interest rate of 9 percent two years from today?

Accepted Answer

A)  $534.65
B)  $546.35
C)  $565.18
D)  $574.13E) B) and C)
F) A) and D)

Question 14

Fourteen years ago William put money in his account at First National Bank.William decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

Accepted Answer

A)  5 percent
B)  7 percent
C)  10 percent
D)  14 percentE) B) and D)
F) A) and B)

Question 15

You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago.If,instead of being careless with the $1 in change,this person had deposited it into a bank and earned 2 percent interest every year for 140 years,how much would be in the account today according to the rule of 70?

Accepted Answer

A)  $4
B)  $8
C)  $16
D)  $32E) A) and C)
F) B) and D)

Question 16

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

Accepted Answer

A)  $285.83
B)  $236.98
C)  $202.04
D)  $145.65E) All of the above
F) A) and C)

Question 17

Amelia knows that she has about $105 in her bank account.She knows she earned an interest rate of 4 percent,but she doesn't remember how much she opened the account with a year ago.How much did she put in?

Accepted Answer

A)  $98.18
B)  $100.96
C)  $102.04
D)  $103.24E) C) and D)
F) B) and D)

Question 18

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

Accepted Answer

A)  $2,000/1.06
B)  $1000/(1.06) 2
C)  $1000/(1 + 0.062) 
D)  None of the above are correct.E) None of the above
F) B) and D)

Question 19

Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is

Accepted Answer

A)  $725.62.It would be higher if the interest rate were higher.
B)  $727.28.It would be higher if the interest rate were higher.
C)  $725.62.It would be lower if the interest rate were higher.
D)  $727.28.It would be lower if the interest rate were higher.E) A) and B)
F) None of the above

Question 20

Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest rate.How much money do you have in your account now?

Accepted Answer

A)  $22,880.00
B)  $23,200.00
C)  $23,232.00
D)  $23,328.00E) B) and D)
F) A) and C)

Exam 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money

Fourteen years ago William put money in his account at First National Bank.William decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

Correct Answer
verified

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3 percent.The future value of the $500 after 1 year is

Correct Answer
verified

Amelia knows that she has about $105 in her bank account.She knows she earned an interest rate of 4 percent,but she doesn't remember how much she opened the account with a year ago.How much did she put in?

Correct Answer
verified

What is the future value of $450 at an interest rate of 9 percent two years from today?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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What is the future value of $800 one year from today if the interest rate is 7 percent?

Correct Answer
verified

The future value of a deposit in a savings account will be larger

Correct Answer
verified

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

Correct Answer
verified

You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years?

Correct Answer
verified

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

Correct Answer
verified

Which,if any,of the present values below are computed correctly?

Correct Answer
verified

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3%.The future value of the $500 in 5 years to the nearest cent is

Correct Answer
verified

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

Correct Answer
verified

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest,and at the end of the N years you have $4,082.59.What is the number of years,N?

Correct Answer
verified

Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest rate.How much money do you have in your account now?

Correct Answer
verified

You are better off choosing $100 today rather than $200 in 9 years if the interest rate is

Correct Answer
verified

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Correct Answer
verified

Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is

Correct Answer
verified

Exam 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money

Fourteen years ago William put money in his account at First National Bank.William decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

Correct AnswerverifiedShow Answer

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3 percent.The future value of the $500 after 1 year is

Correct AnswerverifiedShow Answer

Amelia knows that she has about $105 in her bank account.She knows she earned an interest rate of 4 percent,but she doesn't remember how much she opened the account with a year ago.How much did she put in?

Correct AnswerverifiedShow Answer

What is the future value of $450 at an interest rate of 9 percent two years from today?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the future value of $800 one year from today if the interest rate is 7 percent?

Correct AnswerverifiedShow Answer

The future value of a deposit in a savings account will be larger

Correct AnswerverifiedShow Answer

If you put $125 into an account that paid 3.25 percent interest,then how much money would you have in the account after 20 years?

Correct AnswerverifiedShow Answer

You receive $500 today which you plan to save for two years.Also,in two years you will be given another $500.If the interest rate is 5 percent,what is the present value of the payment of $500 today and the $500 in two years?

Correct AnswerverifiedShow Answer

What is the present value of a payment of $1,000 two years from now if the interest rate is 6%?

Correct AnswerverifiedShow Answer

Which,if any,of the present values below are computed correctly?

Correct AnswerverifiedShow Answer

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 3%.The future value of the $500 in 5 years to the nearest cent is

Correct AnswerverifiedShow Answer

Of the following interest rates,which is the highest one at which you would prefer to have $170 ten years from today instead of $100 today?

Correct AnswerverifiedShow Answer

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest,and at the end of the N years you have $4,082.59.What is the number of years,N?

Correct AnswerverifiedShow Answer

Imagine that two years ago you inherited $20,000 and put it into an account paying a fixed 8 percent annual interest rate.How much money do you have in your account now?

Correct AnswerverifiedShow Answer

You are better off choosing $100 today rather than $200 in 9 years if the interest rate is

Correct AnswerverifiedShow Answer

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Correct AnswerverifiedShow Answer

Suppose you will receive $800 in two years.If the interest rate is 5 percent,then the present value of this future payment is

Correct AnswerverifiedShow Answer

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