96.
You are scheduled to
receive
a $750 cash flow in one year, a $1,000 cash flow in two
years, and
pay
a $300 payment in four years. If interest rates are 6 percent per year, what
is the combined present value of these cash flows?
97.
You are scheduled to
pay
a $350 cash flow in one year, and
receive
a $1,000 cash flow in
years 3 and 4. If interest rates are 10 percent per year, what is the combined present value
of these cash flows?
98.
As the production manager of HPG, Inc., you have received an offer from the supplier who
provides the wires used in headsets. Due to poor planning, the supplier has an excess
amount of wire and is willing to sell $750,000 worth for only $600,000. You already have
one year’s supply of wire on hand. This new wire would be used one year from today. What
implied interest rate would your firm be earning if you purchased the wire?
99.
An appliance store sells a TV for $1,200 and gives their customers a full three years to pay
for the TV. If interest rates are 5 percent, what is the equivalent sales price of the TV
when the customer takes the full 3 years to pay for it?
100.
Assume you borrow $5,000 today and pay back the loan in one lump sum four years from
today. You are charged 8 percent interest per year. What amount will you pay back and
how much interest will you pay?
101.
Assume that you borrow $2,000 from your sister and that you will pay her back in one lump
sum. She charges you 9 percent interest in year 1 and increases the rate by 1 percent per
year until the loan is paid off. How much will you owe if you wait until year 3 to pay off the
loan?
102.
Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of
$75 in advance (today) and one year from now you need to repay $750. What implied
interest rate are you paying?
103.
Assume you borrow $100 from a payday lender. The terms are that you must pay a fee of
$25 in advance (today) and one year from now you need to repay $112. What implied
interest rate are you paying?
104.
Five years ago, sales were $4 million. Today your company’s sales are $10 million. What
annual rate have sales been growing?
105.
How long will it take for the purchasing power of $1 to be cut in half if inflation is 4
percent?
106.
You have $100,000 in your account. Assuming no additional deposits are made and your
account earns 15 percent per year, how long will it take for the account to have a balance
of $500,000?
107.
You have $50,000 in your account. Assuming no additional deposits are made and your
account earns 8 percent per year, how long will it take for the account to have a balance of
$500,000?
108.
Which of the following statements is correct?
109.
You double your money in 5 years. The reason your return is not 20 percent per year is
because:
110.
You borrow $3,500 and will pay back the entire amount in 5 years. You are charged 9
percent interest per year. How much interest do you pay on this loan?
111.
You borrow $10,000 and will pay back the entire amount in 10 years. You are charged 6
percent interest per year. How much interest do you pay on this loan?
112.
Your firm receives an offer from the supplier who provides computer chips used to
manufacture cell phones. Due to poor planning, the supplier has an excess amount of
chips and is willing to sell $600,000 worth of chips for only $500,000. You already have two
years’ supply on hand. It would cost you $7,500 today to store the chips until your firm
needs them in two years. What implied interest rate would you be earning if you
purchased and store the chips?
113.
You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in
years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment
be worth at the end of the fourth year?
114.
You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in
years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment
be worth at the end of the fourth year?
115.
We call the process of earning interest on both the original deposit and on the earlier
interest payments:
116.
When your investment compounds, your money will grow in a(n) __________ fashion.
117.
You invested $1,000 for 5 years in an account that earns 5 percent. However, today you
learn that you are able to move the account into an investment that earns 10 percent.
Which of the following statements is correct?
118.
Which of the following statements is incorrect with respect to time lines?
119.
Which of the following will not increase a present value?
120.
Suppose a U.S. Treasury bond promises to pay $9,780.13 in three years. If bonds of this
type are generating a 4 percent annual return, how much would you pay for this bond
today?
121.
A firm’s net income last year was $2.65 million. Its net income grew 8 percent during the
last 5 years. If that growth rate continues, how long will it take for the firm’s net income to
double?
122.
A firm’s net income last year was $1.5 million. Its net income grew 5 percent during the
last 5 years. If that growth rate continues, how long will it take for the firm’s net income to
double?
123.
You want to retire in 25 years and you have just inherited $300,000. You believe you will
need $1,450,000 upon retirement. What rate will you need to earn on the account to
achieve this goal?
124.
You want to retire in 40 years and you have $40,000 saved in your retirement account. You
believe you will need $1,500,000 upon retirement. What rate will you need to earn on the
account to achieve this goal?
AACSB: Analytic