978-0133423822 chapter 5 Part 2

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16) If you want to have $90 in four years, how much money must you put in a savings

account today? Assume that the savings account pays 8.5% and it is compounded monthly

(round to the nearest $1).

A) $64

B) $65

C) $66

D) $71

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

17) How much money must be put into a bank account yielding 5.5% (compounded

annually) in order to have $250 at the end of ive years (round to nearest $1)?

A) $237

B) $191

C) $187

D) $179

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

18) If you want to have $1,200 in 27 months, how much money must you put in a savings

account today? Assume that the savings account pays 14% and it is compounded monthly

(round to the nearest $10).

A) $910

B) $890

C) $880

D) $860

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

Use the following information to answer the following question(s).

A Max, Inc. deposited $2,000 in a bank account that pays 12% interest annually.

19) What will the dollar amount be in four years, assuming that interest is paid annually?

A) $2,800

B) $3,100

C) $3,111

D) $3,148

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

20) What will the dollar amount be if the interest is compounded semiannually for those

four years?

A) $3,100

B) $3,188

C) $3,240

D) $3,290

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

21) How many periods would it take for the deposit to grow to $6,798 if the interest is

compounded semiannually?

A) 17

B) 19

C) 21

D) 25

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

22) You bought a painting 10 years ago as an investment. You originally paid $85,000 for it.

If you sold it for $484,050, what was your annual return on investment?

A) 47%

B) 4.7%

C) 19%

D) 12.8%

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

23) You deposit $5,000 today in an account drawing 12% compounded quarterly. How much

will you have in the account at the end of 2 1/2 years?

A) $7,401

B) $5,523

C) $7,128

D) $6,720

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

24) Middletown, USA currently has a population of 1.5 million people. It has been one of

the fastest growing cities in the nation, growing by an average of 4% per year for the last

ive years. If this city’s population continues to grow at 4% per year, what will the

population be 10 years from now?

A) 1,560,000

B) 2,220,366

C) 2,100,000

D) 1,824,979

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

25) How many years will it take for an initial investment of $200 to grow to $544 if it is

invested today at 8% compounded annually?

A) 8 years

B) 10 years

C) 11 years

D) 13 years

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

26) When using a inancial calculator, which of the following is the correct way to ind the

future value of $200 deposited today in an account for four years paying annual interest of

3% ?

A) N=4, i=.03, PV=-200, PMT=0, solve for FV

B) N=4, i=3, PV=-200, PMT=0, solve for FV

C) N=4, i=3, PV=0, PMT = $200, solve for FV

D) N=4, i=3, FV=200, PMT=0, solve for PV

Question Status: New question

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

27) The future value of a single sum:

A) increases as the compound rate decreases.

B) decreases as the compound rate increases.

C) increases as the number of compound periods decreases.

D) increases as the compound rate increases.

Question Status: Revised

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

28) When using a inancial calculator, which of the following is a correct way to ind the

future value of $200 deposited today in an account for four years paying annual interest of

2% compounded quarterly?

A) N=16, i=.005, PV=200, PMT=0, solve for FV

B) N=4, i=.5, PV=200, PMT=0, solve for FV

C) N=16, i=.5, PV=-200, PMT=0, solve for FV

D) N=16, i=.03, FV=-200, PMT=0, solve for PV

Question Status: New question

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

29) When using EXCEL to ind the future value of $2,000 invested in an account that would

earn interest of 7.5% for 18 years, the correct entry would be

A) =FV(7.5,18,0,-1,000)

B) =PV(.075,18,0,-1,000)

C) =FV(7.5,18,0,1,000)

D) =FV(.075,18,0,-1,000)

Question Status: New question

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

30) When using a inancial calculator, which of the following is a correct way to ind the

future value of $200 deposited today in an account for four years paying annual interest of

2% compounded quarterly?

A) N=16, i=.005, PV=-200, PMT=0, solve for FV

B) N=4, i=.5, PV=$200, PMT=0, solve for FV

C) N=16, i=.5, PV=-200, PMT=0, solve for FV

D) N=16, i=.03, FV=200, PMT=0, solve for PV

Question Status: New question

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

31) If you purchased a share of Mico.com stock on March 1, 1993 for $45 and you sold the

stock at $168 on February 28, 1998, what was your annual rate of return on the stock?

A) 83%

B) 75%

C) 20%

D) 30%

E) 50%

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

32) At 8%, compounded annually, how long will it take $750 to double?

A) 9 years

B) 8 years

C) 12 years

D) 4 years

E) 6 years

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

33) The future value of a lump sum deposited today increases as the number of years of

compounding at a positive rate of interest declines.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

34) If we invest money for 10 years at 8% interest, compounded semi-annually, we are

really investing money for 20 six-month periods, during which we receive 4% interest each

period.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

35) Determining the speciied amount of money that you will receive at the maturity of an

investment is an example of a future value equation.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

36) When performing time value of money computations with a inancial calculator or

EXCEL, PV and FV must have opposite signs.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

37) Assuming equal annual rates, the more frequent the compounding periods in a year, the

higher the future value.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

38) Briely discuss how non-annual compounding (more than one compounding period per

year) is preferable to annual compounding if you are an investor.

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

39) If you deposit $1,000 each year in a savings account earning 4%, compounded annually,

how much will you have in 10 years?

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

40) Your bank has agreed to loan you $3,000 if you agree to pay a lump sum of $5,775 in

ive years. What annual rate of interest will you be paying?

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

41) Earnings per share for XYZ, Inc. grew constantly from $7.99 in 1974 to $12.68 in 1980.

What was the compound annual growth rate in earnings-per-share over the period?

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

42) If you invest $450 today and it increases to $6,185 at the end of 20 years, what rate of

return have you earned?

Question Status: Previous edition

Objective: 5.2 Understand compounding and calculate the future value of cash lows using

mathematical formulas, a inancial calculator, and an EXCEL spreadsheet.

Keywords: future value

Principles: Principle 1: Money Has a Time Value

5.3 Discounting and Present Value

1) The present value of a single future sum

A) increases as the number of discount periods increases.

B) is generally larger than the future sum.

C) depends upon the number of discount periods.

D) increases as the discount rate increases.

Question Status: Previous edition

Objective: 5.3 Understand discounting and calculate the present value of cash lows using

mathematical formulas, a inancial calculator, and an Excel spreadsheet.

Keywords: present value

Principles: Principle 1: Money Has a Time Value

2) Assuming two investments have equal lives, a high discount rate tends to favor

A) the investment with large cash low early.

B) the investment with large cash low late.

C) the investment with even cash low.

D) neither investment since they have equal lives.

Question Status: Previous edition

Objective: 5.3 Understand discounting and calculate the present value of cash lows using

mathematical formulas, a inancial calculator, and an Excel spreadsheet.

Keywords: present value

Principles: Principle 1: Money Has a Time Value