Your inheritance will pay you $100,000 a year for five years beginning now. You can invest it in a CD that will pay 7.75 percent annually. What is the present value of your inheritance? (Round to the nearest dollar.)

Question 1 options:

$467,812

$401,916

$399,356

$433,064

Question 2(0.2 points)

The true cost of borrowing is the:

Question 2 options:

effective annual rate.

periodic rate.

annual percentage rate.

quoted interest rate.

Question 3(0.2 points)

The future value of multiple cash flows is:

Question 3 options:

equal to the sum of all the cash flows.

less than the sum of the cash flows.

greater than the sum of the cash flows.

higher or lower than the cash flows depending on the interest rate.

Question 4(0.2 points)

Lloyd Harris is planning to invest $3,500 every year for the next six years in an investment paying 13 percent annually. What will be the amount he will have at the end of the six years? (Round to the nearest dollar.)

Question 4 options:

$26,124

$24,670

$29,129

$21,000

Question 5(0.2 points)

You are interested in investing $15,000, a gift from your grandparents, for the next four years in a mutual fund that will earn an annual return of 8 percent. What will your investment be worth at the end of four years? (Round to the nearest dollar.)

Question 5 options:

$18,816

$20,407

$18,089

$20,221

Question 6(0.2 points)

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 6 options:

$2,448

$2,229

$2,850

$2,304

Question 7(0.2 points)

The present value of an annuity due is less than the present value of an ordinary annuity.

Question 7 options:

TrueFalse

Question 8(0.2 points)

When discount rate:

Question 8 options:

decreases, the present value of any future cash flow increases.

increases, the present value of any future cash flow does not change.

increases, the present value of any future cash flow increases.

decreases, the present value of the future cash flow does not change.

Question 9(0.2 points)

Helen Ashley is expecting cash flows of $50,000, $75,000, $125,000, and $250,000 from an inheritance over the next four years. If she can earn 11 percent on any investment that she makes, what is the present value of her inheritance? (Round to the nearest dollar.)

Question 9 options:

$412,372

$434,599

$414,454

$361,998

Question 10(0.2 points)

You plan to save $1,400each year, for the next four years, beginning now, to pay for a vacation. If you invest $1,400 each year at 6%, how much will you have at the end of the four years? Round to the nearest dollar.

Question 10 options:

$4,019

$6,124

$5,618

$6,492

Question 11(0.2 points)

For computation of the present value of growing annuity withnperiods, the cash flow for the current period is used and not the cash flow to be received in the next period.

Question 11 options:

TrueFalse

Question 12(0.2 points)

Cassandra Dawson wants to save for a trip to Australia. She will need $12,000 at the end of four years. She can invest a certain amount at the beginning of each of the next four years in a bank account that will pay her 6.8 percent annually. How much will she have to invest annually to reach her target? (Round to the nearest dollar.)

Question 12 options:

$2,980

$2,711

$2,538

$3,000

Question 13(0.2 points)

Which of the following statements is true?

Question 13 options:

The longer the time period that funds are invested, the greater the future value.

The shorter the time period that funds are invested, the greater the future value.

The higher the interest rate, the slower the value of an investment will grow.

The lower the discount rate that funds are invested at, the greater the future value.

Question 14(0.2 points)

You need to have $15,000 in five years to payoff a home equity loan. You can invest in an account that pays 5.75 percent compounded quarterly. How much will you have to invest today to attain your target in five years? (Round to the nearest dollar.)

Question 14 options:

$11,275

$12,250

$13,184

$4,903

Question 15(0.2 points)

Joseph Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)

Question 15 options:

$16,625

$17,474

$18,850

$16,088

Question 16(0.2 points)

Only the annual percentage rate (APR) or some other quoted rate should be used as the interest rate factor for present or future value calculations.

Question 16 options:

TrueFalse

Question 17(0.2 points)

To calculate the present value of a future amount, we divide the future amount by the future value factor.

Question 17 options:

TrueFalse

Question 18(0.2 points)

Your aunt is looking to invest a certain amount today. Which of the following choices will give the maximum interest?

Question 18 options:

Three-year CD at 6.75% annual rate

Three-year CD at 7% annual rate

Three-year CD at 6.5% annual rate

Three-year CD at 6.25% annual rate

Question 19(0.2 points)

Which of the following statements is true of amortization?

Question 19 options:

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

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

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

With an amortized loan, the interest portion of each month's payment remains unchanged.

Question 20(0.2 points)

Which of the following statements is true of amortization?

Question 20 options:

Amortization schedule represents only the interest portion of the loan.

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

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

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

Question 21(0.2 points)

Winston Baker wants to invest $25,000 in a spa that his sister is starting. He will triple his investment in six years. What is the rate of return that Winston is being promised? (Rounded to the nearest percent.)

Question 21 options:

12%

18%

25%

20%

Question 22(0.2 points)

Richard McLean wants to invest $3,000 in an account paying 5.25 percent compounded quarterly. What is the interest on interest after four years?

Question 22 options:

$65.98

$630.00

$695.98

$157.50

Question 23(0.2 points)

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 23 options:

present value

future value

future value of an annuity

present value of an annuity

Question 24(0.2 points)

Lorene Buckley wants to invest $3,500 today in a money market fund that pays a quarterly interest at 5 percent. She plans to fund a scholarship with the proceeds at her alma mater, Towson University. How much will Lorene have at the end of seven years? (Round to the nearest dollar.)

Question 24 options:

$5,091

$5,075

$3,849

$4,956

Question 25(0.2 points)

The compound annual growth rate (CAGR) is the average annual growth rate over a specified period of time.

Question 25 options:

TrueFalse

Question 26(0.2 points)

The growth in the future value of an investment over time is not linear, but exponential.

Question 26 options:

TrueFalse

Question 27(0.2 points)

The true cost of lending is the:

Question 27 options:

effective annual rate.

annual percentage rate.

quoted interest rate.

interest rate per period.

Question 28(0.2 points)

The more frequently the interest payments are compounded, the larger the future value of $1 for a given time period.

Question 28 options:

TrueFalse

Question 29(0.2 points)

The quoted interest rate is by convention a simple annual interest rate,such as the annual percentage rate (APR).

Question 29 options:

TrueFalse

Question 30(0.2 points)

Which of the following is true of the future value of an investment?

Question 30 options:

The higher the inflation rate, the lower the future value of an investment.

The lower the present value of an investment, the higher the future value of an investment.

The lower the number of compounding periods, the higher the future value of an investment.

The higher the interest rate, the higher the future value of an investment.

Question 31(0.2 points)

The higher the discount rate, the lower the present value of a future cash flow.

Question 31 options:

TrueFalse

Question 32(0.2 points)

Which of the following statements is true?

Question 32 options:

The future value of an investment is the reciprocal of its present value.

The presentvalue is calculated by using the discount factor.

The present value (PV) is often called the compounded value of future cash payments.

Present value calculations involve converting the initial amount into a future amount.

Question 33(0.2 points)

Which of the following statements is true of the rule of 72?

Question 33 options:

It can be used to determine the amount of time it takes to double an investment.

It is fairly accurate for interest rates between 25 and 50 percent.

It states that the time to double your money (TDM) approximately equals 72/i, whereirepresents the years it takes to double your investment.

It can be used to estimate approximate compound interest earned for a period of 72 days.

Question 34(0.2 points)

Nickole wants to invest in a bank CD that will pay her 7.8 percent annually. If she invests $11,500 today, when will she reach her goal of $15,000? (Round off to the nearest year.)

Question 34 options:

5 years

7 years

4 years

2 years

Question 35(0.2 points)

The present value of multiple cash flows is:

Question 35 options:

greater than the sum of the cash flows.

less than the sum of the cash flows.

equal to the sum of all the cash flows.

higher or lower than the cash flows depending on the interest rate.

Question 36(0.2 points)

The effective annual interest rate (EAR) is the true cost of borrowing and lending.

Question 36 options:

TrueFalse

Question 37(0.2 points)

Damien McCoy has loaned money to his brother at an interest rate of 5.85 percent. He expects to receive $987, $1,012, $1,062, and $1,162 at the end of the next four years as complete repayment of the loan with interest. How much did he loan out to his brother? (Round to the nearest dollar.)

Question 37 options:

$3,685

$3,757

$3,785

$3,657

Question 38(0.2 points)

Newship Inc. has borrowed from its bank at a rate of 8 percent and will repay the loan with interest over the next five years. Its scheduled payments, starting at the end of the year are as follows$450,000, $560,000, $750,000, $875,000, and $1,000,000. What is the present value of these payments? (Round to the nearest dollar.)

Question 38 options:

$2,989,351

$2,815,885

$2,431,224

$2,735,200

Question 39(0.2 points)

Bryant Investments is putting out a new product. The product will pay out $32,000 in the first year, and after that the payouts will grow by an annual rate of 2.75 percent forever. If you can invest the cash flows at 7.25 percent, how much will you be willing to pay for this perpetuity? (Round to the nearest dollar.)

Question 39 options:

$711,111

$531,111

$721,111

$633,111

Question 40(0.2 points)

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

Question 40 options:

TrueFalse

Question 41(0.2 points)

David Stephens has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

Question 41 options:

$39,208

$36,022

$37,712

$41,675

Question 42(0.2 points)

The higher the rate of interest, the more likely you will elect to invest your funds and forgo current consumption.

Question 42 options:

TrueFalse

Question 43(0.2 points)

What is the appropriate interest rate to use when making future or present value calculations?

Question 43 options:

The annual percentage rate (APR)

The simple interest

The quoted interest rate

The effective annual interest rate (EAR)

Question 44(0.2 points)

Which of the following equations is used to compute the future value for continuous compounding?

Question 44 options:

FV= ei PV

FV= PV e i n

FV= ei PV

FV= PV e i n

Question 45(0.2 points)

Which of the following statements is true of time value of money?

Question 45 options:

A dollar received today is worth more than a dollar to be received in the future because funds received today can be invested to earn a return.

A dollar received today is worth less than a dollar to be received in the future because future dollars are not affected by inflation.

A dollar to be received in the future is worth more than a dollar received today because it would have less risk associated with it.

A dollar received today is worth more than a dollar to be received in the future because future dollars are not affected by inflation.

Question 46(0.2 points)

Juan and Rachel Burpo plan to buy a time-share in six years of $16,860. In order to have adequate funds to do so, the Burpo want to make a deposit to their money market fund today. Assume that they will be able to earn an investment rate of 5.75%, compounded annually. How much will Juan and Rachel need to deposit today to achieve their goal? (Round off to the nearest dollar.)

Question 46 options:

$14,243

$8,885

$11,138

$12,055

Question 47(0.2 points)

Rosalia White will invest $3,000 in an IRA for the next 30 years starting at the end of this year. The investment will earn 13 percent annually. How much will she have at the end of 30 years? (Round to the nearest dollar.)

Question 47 options:

$879,598

$748,212

$912,334

$1,233,450

Question 48(0.2 points)

If your investment pays the same amount at the end of each year for a period of six years, the cash flow stream is called:

Question 48 options:

an ordinary annuity.

a perpetuity.

an annuity due.

a growing perpetuity.

Question 49(0.2 points)

If you had a choice of choosing a payment of $5,000 to be received in five years being discounted at 8 percent or at 10 percent, you should always choose the higher rate because it gives you the higher present value.

Question 49 options:

TrueFalse

Question 50(0.2 points)

The future value factor for 10 years at 15% is calculated as (1 + 0.15)10.

Question 50 options:

TrueFalse