Question 1(1 point)

In an annuity due, cash flows occur at the beginning of each period.

Question 1 options:

TrueFalse

Question 2(1 point)

Compound interest consists of both simple interest and interest on interest.

Question 2 options:

TrueFalse

Question 3(1 point)

The process of calculating the present value of a future cash flow is called compounding.

Question 3 options:

TrueFalse

Question 4(1 point)

TheTruth-in-Lending Actand theTruth-in-Savings Actrequire by law that the annual percentage rate (APR) be disclosed on all consumer loans and savings plans and that it be prominently displayed on advertising and contractual documents.

Question 4 options:

TrueFalse

Question 5(1 point)

The value of a dollar invested at a positive interest rate grows over time but at a slower rate further into the future.

Question 5 options:

TrueFalse

Question 6(1 point)

Finor Traps manufactures an innovative mouse trap. Total sales for the current year is $325,000. The company expects its sales to go up to $500,000 in five years. What is the expected growth rate in sales for this firm? (Round to the nearest percent.)

Question 6 options:

12%

9%

11%

6%

Question 7(1 point)

Which of the following statements is true of amortization?

Question 7 options:

With an amortized loan, a periodical payment of principal portion gradually decreases over a period.

Amortization schedule represents only the interest portion of the loan.

The computation of loan amortization is wholly based on the computation of simple interest.

With an amortized loan, a bigger proportion of each month's payment goes toward interest in the early periods.

Question 8(1 point)

The true cost of lending is the:

Question 8 options:

effective annual rate.

annual percentage rate.

interest rate per period.

quoted interest rate.

Question 9(1 point)

Kevin Robertson would like to buy a condo in Florida in six years. He is looking to invest $75,000 today in a stock that is expected to earn a return of 18.3 percent annually. How much will he have at the end of six years? (Round to the nearest dollar.)

Question 9 options:

$157,350

$273,620

$205,575

$184,681

Question 10(1 point)

The time value of money refers to the issue of:

Question 10 options:

why a dollar received tomorrow is worth more than a dollar received today.

what the time required to double an amount of money.

what the value of the stream of future cash flows is today.

why people prefer to consume things at some time in the future rather than today.

Question 11(1 point)

Lori Willis plans to invest for retirement, which she hopes will be in 20 years. She is planning to invest $25,000 today in U.S. Treasury bonds that will earn interest at 6.25 percent annually. How much will she have at the end of 20 years? (Round to the nearest dollar.)

Question 11 options:

$50,625

$84,046

$75,000

$68,870

Question 12(1 point)

Dynoxo Textiles has a cash inflow of $1 million, which it needs for a long-term investment, at the end of one year. It plans to deposit the money in a bank CD that pays daily interest at 4.50 percent. What will be the value of the investment at the end of the year? (Round to the nearest dollar.)

Question 12 options:

$1,046,025

$1,020,475

$1,037,500

$1,000,103

Question 13(1 point)

Tim Dodson has borrowed $8,600 to pay for his new car. The annual interest rate on the loan is 9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment if he begins his payment beginning now? (Round to the nearest dollar.)

Question 13 options:

$2,448

$2,304

$2,850

$2,229

Question 14(1 point)

Ransport Company has made an investment in another company that will guarantee it a cash flow of $37,250 each year for the next five years. If the company uses a discount rate of 15 percent on its investments, what is the present value of this investment? (Round to the nearest dollar.)

Question 14 options:

$186,250

$251,154

$124,868

$101,766

Question 15(1 point)

Graciela Treadwell won a lottery. She will have a choice of receiving $25,000 at the end of each year for the next 30 years, or a lump sum today. If she can earn a return of 10 percent on any investment she makes, what is the minimum amount she should be willing to accept today as a lump-sum payment? (Round to the nearest hundred dollars.)

Question 15 options:

$750,000

$334,600

$212,400

$235,700

Question 16(1 point)

William deposited $25,000 today that would earn an interest at the rate of 3% for a period of 2 years. The amount of $25,000 represents the:

Question 16 options:

future value

future value of an annuity

present value of an annuity

present value

Question 17(1 point)

Dat Nguyen is depositing $17,500 in an account paying an annual interest rate of 8.25 percent compounded monthly. What is the interest on interest after six years?

Question 17 options:

$10,925.44

$8,662.50

$1,092.48

$2,497.63

Question 18(1 point)

Paul Springer plans to save for a down payment for a house in 10 years. He will be able to invest $12,000 today in a money market account that will pay him an interest of 5.50 percent on a monthly basis. How much will he have at the end of 10 years?

Question 18 options:

$23,080

$24,859

$12,640

$20,773

Question 19(1 point)

Patrick Smith has $5,000 to invest in a small business venture. His partner has promised to pay him back $8,200 in five years. What is the return earned on this investment?

Question 19 options:

9.3%

11.1%

8.7%

10.4%

Question 20(1 point)

Global

Shippers Inc. has forecast earnings of $1,233,600, $1,345,900, and $1,455,650 for the next three years. What is the future value of these earnings if the firm's opportunity cost is 13 percent? (Round to the nearest dollar.)

Question 20 options:

$4,362,428

4,551,701

$4,214,360

$3,900,865