Question 30

Dodd Company is considering an investment, which will return a lump sum of $675,000 four years from now. Below is some of the time value of money information that Dodd has compiled that might help in planning compounded interest decisions.

Present value of 1 for 4 periods at 10%		0.68301
Future value of 1 for 4 periods at 10%		1.46410
Present value of an annuity of 1 for 4 periods at 10%		3.16986
Future value of an annuity of 1 for 4 periods at 10%		4.64100

To the closest dollar, what amount should Dodd Company pay for this investment to earn a 10% return?

$461,032

$405,000

$534,914

		$270,000
Question 31

Ando Company earns 11% on an investment that pays back $660,000 at the end of each of the next 5 years. Ando finance department has the following values related to the time value of money to help in its planning process and compounded interest decisions.

Present value of 1 for 5 periods at 11%		0.59345
Future value of 1 for 5 periods at 11%		1.68506
Present value of an annuity of 1 for 5 periods at 11%		3.69590
Future value of an annuity of 1 for 5 periods at 11%		6.22780

To the closest dollar, what is the amount Ando invested to earn the 11% rate of return?

$391,677

$2,439,294

$178,577

$1,112,139

Question 32

In order to compute the present value of an annuity, it is necessary to know the

1. discount rate.
2. number of discount periods and the amount of the periodic payments or receipts.

2.

1.

Both 1 and 2.

Something in addition to 1 and 2.

Question 33

A $30,000, 8%, 10-year note payable that pays interest quarterly would be discounted back to its present value by using tables that would indicate which one of the following period-interest combinations?

40 interest periods, 2% interest

10 interest periods, 2% interest

10 interest periods, 8% interest

40 interest periods, 8% interest

Question 34

If a bond has a contract rate of interest of 6%, but the discount rate of interest is 8%, the bond

will sell at a premium (more than face value).

will sell at its face value.

may sell at either a premium or a discount.

will sell at a discount (less than face value).

Question 36

When determining the proceeds received when issuing a bond, the factor applied to the amount of the bond principal is determined from the table of the

present value of an annuity 1.

future value of an annuity 1.

present value of 1.

future value of 1.