School

Tarrant County College, Fort Worth **We aren't endorsed by this school

Course

FINA 3313

Subject

Finance

Date

Oct 27, 2023

Pages

5

Uploaded by kcastro9912 on coursehero.com

Fina Ch4 quiz
1)
What tools can be used to solve time value of money problems?
Manually by mathematical formula
financial calculator
tables of TVM factors
Excel
2)
Which of the following is NOT true about the time value of money concept?
The general approach is to take money received in the future as a benchmark and
compare that to how much the same amount of money is worth now.
3)
What is the future value of $100 invested at 10% simple interest for 1 year?
110
4)
If you feel that the value of $107 in one year is just as good as $100 now.
the $100 is the
Present Value (PV)
(Links to an external site.)
of the $107 to
be received in one year. True
5)
What is the future value of $100 invested at 10% compounded annually for
3 years? Enter the answer in dollar format without $ sign or thousands
comma -> 3519.23 and not $3,519.23 or 3,519.23. (133.10 )
6)
You should never compare cash flows occurring at different times without
first discounting them to a common date. (true)
7)
The advantage to savers and investors of receiving compound interest
rather than simple interest is that future values are larger because interest
is earned on accumulated interest payments. Also, the difference in future
values becomes smaller as time goes by. (false as the difference between Fv
becomes larger as time goes by.
8)
What is the future value of $100 invested at 10% compounded annually for
10 years? (Enter the answer in dollar format without $ sign or thousands
comma -> 3519.23 and not $3,519.23 or 3,519.23) answer=259.37

9)
What is the present value of an investment that will give you $100 after 10
years with a rate of 10% compounded annually? (Enter the answer in dollar
format without $ sign or thousands comma -> 3519.23 and not $3,519.23 or
3,519.23) answer=38.55
10)
Future values are
positively
related to interest rates and time - the bigger
the interest rate and the more compounding periods, the greater the future
value will be. True
11)
You end up with $20,000 after investing for 20 years at 8% annually. What
was the PV? (Enter the answer in dollar format without $ sign or thousands
comma -> 3519.23 and not $3,519.23 or 3,519.23) answer=
4,290.96
12)
Maverick Jane places $800 in a savings account paying 6% interest
compounded annually. How much money will be in the account at the end
of five year? (Enter the answer in dollar format without $ sign or thousands
comma -> 3519.23 and not $3,519.23 or 3,519.23) answer= 1070.58
13)
You start with $1,000 and end up with $5,000 after 10 years. What was the
interest rate? (Enter the answer in percentage format to two decimal places
without the % sign -> 9.33 and not 9.33% or .09) answer:17.46
14)
The single period TVM lump sum formula can be used to solve for PV, FV, or
r. Which is the correct formula?
FV = PV(1+r)
15)
How many years will it take to double your $10,000 investment if you can
earn a 4% annual return? (round it to 2 numbers after the decimal point)
17.67
16)
There is a linear relationship between future values and the number of
compounding periods for any present value and non-zero interest rate.
False, exponential
17)
An
ordinary (deferred) annuity
is an annuity for which the cash flow occurs
at the
beginning
of each period. FALSE

18)
You deposit $500 into an investment account each year for 10 years and
earn 8% interest per year. How much will you end up with after the 10
years? (Enter the answer in dollar format without $ sign or thousands
comma -> 3519.23 and not $3,519.23 or 3,519.23) 7243.28
19)
You deposit $500 into an investment account each year for 10 years and
earn 8% interest per year. How much will you end up with after the 10
years?
(500/0.08)*(1.08^10-1)
20)
You start out with $10,000 in an account. How much must you contribute
at the beginning of each year in order to end up with $100,000 after 20
years if you earn 3% per year? Enter the answer in dollar format without $
sign or thousands comma -> 3519.23 and not $3,519.23 or 3,519.23")
answer 2960.60
21)
The present value of an annuity stream of $100 per year is $614 when
valued at a 10% rate. By approximately how much would the value change if
these were annuities due? Increase by $61
22)
How much more is a perpetuity of $1,000 worth than an annuity of the
same amount for 20 years? Assume a 10% interest rate and cash flows at
end of period. (Enter the answer in dollar format without $ sign or
thousands comma -> 3519.23 and not $3,519.23 or 3,519.23) answer
$1484.44
23)
You will contribute $10,000 to an account at the end of this year, with these
contributions increasing by 1.5% per year and being made each year
indefinitely. What is the PV of this if the discount rate is 3%? (Enter the
answer in dollar format without $ sign or thousands comma -> 3519.23 and
not $3,519.23 or 3,519.23) answer=
666,666.67
24)
You plan to deposit $13,000 in a bank account at the end of the year. Next
year you will deposit $10,000, then $10,000 in the third year, and $4000 in
the fourth year. What is the PV if the discount rate is 5%? (Enter the answer
in dollar format without $ sign or thousands comma -> 3519.23 and not
$3,519.23 or 3,519.23) answer=33380.43

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