Accounting Appendix B How much will Keisha have accumulated after 2 years?

35) Jessica received a gift of $7,500 at the time of her high school graduation. She invests it in an

account that yields 10% compounded semiannually. What will the value of Jessica’s investment

be at the end of 5 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) $8,250.00

B) $11,250.00

C) $12,216.75

D) $9,375.00

E) $10,500.00

22

36) A company expects to invest $5,000 today at 12% annual interest and plans to receive

$15,529 at the end of the investment period. How many years will elapse before the company

accumulates the $15,529? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) 0.322 years

B) 3.1058 years

C) 5 years

D) 8 years

E) 10 years

37) Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest

compounded quarterly. How much will Keisha have accumulated after 2 years? (PV of $1, FV of

$1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

A) $4,433.80

B) $4,340.00

C) $4,390.40

D) $3,920.00

E) $3,500.00

38) How long will it take an investment of $25,000 at 6% compounded annually to accumulate

to a total of $35,462.50? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) 4 years

B) 5 years

C) 6 years

D) 2 years

E) 10 years

39) What annual interest rate is required to accumulate $6,802.50 in four years from an

investment of $5,000? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) 5%

B) 8%

C) 10%

D) 12%

E) 15%

40) Russell Company has acquired a building with a loan that requires payments of $20,000

every six months for 5 years. The annual interest rate on the loan is 12%. What is the present

value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) $72,096

B) $113,004

C) $147,202

D) $86,590

E) $200,000

41) Pelcher Company acquires a machine by issuing a note that requires semiannual payments of

$4,000 for 3 years. The interest rate on the note is 10% compounded semiannually. What is the

cost of the machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) $17,421.20

B) $20,302.80

C) $10,892.80

D) $ 9.947.41

E) $24,000.00

42) Marc Lewis expects an investment of $25,000 to return $6,595 annually. His investment is

earning 10% per year. How many annual payments will he receive? (PV of $1, FV of $1, PVA of

$1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

A) Three payments

B) Five payments

C) Six payments

D) Four payments

E) More than six payments

43) A company is considering an investment that will return $22,000 semiannually at the end of

each semiannual period for 4 years. If the company requires an annual return of 10%, what is the

maximum amount it is willing to pay for this investment? (PV of $1, FV of $1, PVA of $1, and

FVA of $1) (Use appropriate factor(s) from the tables provided.)

A) Not more than $69,738

B) Not more than $139,476

C) Not more than $88,000

D) Not more than $142,190

E) Not more than $176,000

44) What amount can you borrow if you make six quarterly payments of $4,000 at a 12% annual

rate of interest? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)

from the tables provided.)

A) $24,838.00

B) $21,668.80

C) $31,049.00

D) $40,000.00

E) $44,800.00

45) What amount can you borrow if you make seven semiannual payments of $4,000 at an 8%

annual rate of interest? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate

factor(s) from the tables provided.)

A) $28,000.00

B) $25,760.00

C) $31,049.00

D) $24,008.40

E) $35,691.20

46) An individual is planning to set-up an education fund for her daughter. She plans to invest

$7,000 annually at the end of each year. She expects to withdraw money from the fund at the end

of 9 years and expects to earn an annual return of 8%. What will be the total value of the fund at

the end of 9 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)

from the tables provided.)

A) $87,413

B) $68,040

C) $50,400

D) $126,000

E) $45,360

47) An individual is planning to set-up an education fund for his grandchildren. He plans to

invest $10,000 annually at the end of each year. He expects to withdraw money from the fund at

the end of 10 years and expects to earn an annual return of 8%. What will be the total value of

the fund at the end of 10 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use

appropriate factor(s) from the tables provided.)

A) $46,320

B) $67,107

C) $100,000

D) $144,866

E) $215,890

48) Clara is setting up a retirement fund, and she plans on depositing $5,000 per year in an

investment that will pay 7% annual interest. How long will it take her to reach her retirement

goal of $69,082? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s)

from the tables provided.)

A) 13.816 years

B) 0.072 years

C) 10 years

D) 20 years

E) 5 years

49) Chris wants to accumulate $100,000 in 5 years. He plans on making equal semiannual

deposits into an investment account that earns 12% semiannually in order to reach his goal. How

much must Chris invest every six months? (PV of $1, FV of $1, PVA of $1, and FVA of $1)

(Use appropriate factor(s) from the tables provided.)

A) $24,331.19

B) $10,153.39

C) $13,586.77

D) $10,000.00

E) $7,586.79

50) The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per

quarter in an investment that will pay 12% annual interest. What amount will they have available

for their vacation at the end of 2 years? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use

appropriate factor(s) from the tables provided.)

A) $8,000.00

B) $8,960.00

C) $8,892.30

D) $8,240.00

E) $8,487.20

51) A company needs to have $150,000 in 5 years, and will create a fund to insure that the

$150,000 will be available. If it can earn a 6% return compounded annually, how much must the

company invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1, FV of

$1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

A) $141,000

B) $112,095

C) $100,000

D) $45,000

E) $105,000

52) Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The

interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today?

(PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables

provided.)

A) $16,150

B) $13,600

C) $11,504

D) $13,986

E) $15,343

53) A company has $46,000 today to invest in a fund that will earn 4% compounded annually.

How much will the fund contain at the end of 6 years? (PV of $1, FV of $1, PVA of $1, and

FVA of $1) (Use appropriate factor(s) from the tables provided.)

A) $58,204

B) $47,840

C) $58,075

D) $57,040

E) $62,582

54) Define interest.

55) Explain the concept of the present value of a single amount.

56) Explain the concept of the future value of a single amount.