Chapter 28: Time Value of Money
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
1. Starting to invest early for retirement increases the benefits of compound interest.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
2. Starting to invest early for retirement reduces the benefits of compound interest.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
3. A time line is meaningful even if all cash flows do not occur annually.
a.
True
b.
False
ANSWER:
True
Copyright Cengage Learning. Powered by Cognero.
Page 2
4. A time line is not meaningful unless all cash flows occur annually.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
5. Time lines can be constructed in situations where some of the cash flows occur annually but others occur quarterly.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
6. Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly.
a.
True
b.
False
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
Chapter 28: Time Value of Money
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
LOCAL STANDARDS:
United States – OH – Default City – TBA
ANSWER:
False
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
7. Time lines can be constructed for annuities where the payments occur at either the beginning or the end of the periods.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
8. Time lines cannot be constructed for annuities unless all the payments occur at the end of the periods.
a.
True
b.
False
ANSWER:
False
9. Some of the cash flows shown on a time line can be in the form of annuity payments while others can be uneven
amounts.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
QUESTION TYPE:
True / False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking
STATE STANDARDS:
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
10. Some of the cash flows shown on a time line can be in the form of annuity payments but none can be uneven amounts.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
TOPICS:
Compounding
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
DATE MODIFIED:
1/10/2018 11:50 AM
11. The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum
investment at Time 0 and (2) the greater the present value of a given lump sum to be received at some future date.
a.
True
b.
False
ANSWER:
False
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
DATE MODIFIED:
1/10/2018 11:50 AM
1
Difficulty: Moderate
12. The greater the number of compounding periods within a year, then (1) the greater the future value of a lump sum
investment at Time 0 and (2) the smaller the present value of a given lump sum to be received at some future date.
a.
True
b.
False
ANSWER:
True
1
Difficulty: Moderate
QUESTION TYPE:
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
Compounding
KEYWORDS:
10/30/2017 8:17 PM
1/10/2018 11:50 AM
13. Suppose Sally Smith plans to invest $1,000. She can earn an effective annual rate of 5% on Security A, while Security
B has an effective annual rate of 12%. After 11 years, the compounded value of Security B should be more than twice the
compounded value of Security A. (Ignore risk, and assume that compounding occurs annually.)
a.
True
b.
False
ANSWER:
True
1
DIFFICULTY:
True / False
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
Compounding
KEYWORDS:
10/30/2017 8:17 PM
DATE MODIFIED:
14. Suppose Randy Jones plans to invest $1,000. He can earn an effective annual rate of 5% on Security A, while Security
B has an effective annual rate of 12%. After 11 years, the compounded value of Security B should be somewhat less than
twice the compounded value of Security A. (Ignore risk, and assume that compounding occurs annually.)
a.
True
b.
False
ANSWER:
False
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
True / False
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
Comparative compounding
KEYWORDS:
Bloom?s: Comprehension
DATE CREATED:
10/30/2017 8:17 PM
1/10/2018 11:50 AM
15. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual
compounding?
a.
$205.83
b.
$216.67
c.
$228.07
d.
$240.08
e.
$252.08
ANSWER:
d
QUESTION TYPE:
True / False
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
Comparative compounding
KEYWORDS:
Bloom?s: Comprehension
DATE CREATED:
10/30/2017 8:17 PM
1/10/2018 11:50 AM
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
DATE CREATED:
10/30/2017 8:17 PM
16. How much would Roderick have after 6 years if he has $500 now and leaves it invested at 5.5% with annual
compounding?
a.
$591.09
b.
$622.20
c.
$654.95
d.
$689.42
e.
$723.89
ANSWER:
d
POINTS:
1
DIFFICULTY:
Difficulty: Easy
Multiple Choice
HAS VARIABLES:
False
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
17. JG Asset Services is recommending that you invest $1,500 in a 5-year certificate of deposit (CD) that pays 3.5%
interest, compounded annually. How much will you have when the CD matures?
a.
$1,781.53
b.
$1,870.61
c.
$1,964.14
d.
$2,062.34
e.
$2,165.46
ANSWER:
a
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
18. Your bank offers a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. If you invest
$2,000 in the CD, how much will you have when it matures?
a.
$3,754.27
b.
$3,941.99
c.
$4,139.09
d.
$4,346.04
e.
$4,563.34
ANSWER:
a
DATE MODIFIED:
1/10/2018 11:50 AM
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Page 9
19. Cyberhost Corporation’s sales were $225 million last year. If sales grow at 6% per year, how large (in millions) will
they be 5 years later?
a.
$271.74
b.
$286.05
c.
$301.10
d.
$316.16
e.
$331.96
ANSWER:
c
POINTS:
1
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE MODIFIED:
1/10/2018 11:50 AM
20. Cochrane Associate’s net sales last year were $525 million. If sales grow at 7.5% per year, how large (in millions) will
they be 8 years later?
a.
$845.03
b.
$889.51
c.
$936.33
d.
$983.14
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
TOPICS:
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
Chapter 28: Time Value of Money
1
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TYPE: Multiple Choice: Problem
e.
$1,032.30
ANSWER:
c
POINTS:
1
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
TYPE: Multiple Choice: Problem
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
21. How much would $1, growing at 3.5% per year, be worth after 75 years?
a.
$12.54
b.
$13.20
c.
$13.86
d.
$14.55
e.
$15.28
ANSWER:
b
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
22. How much would $100, growing at 5% per year, be worth after 75 years?
a.
$3,689.11
b.
$3,883.27
c.
$4,077.43
d.
$4,281.30
e.
$4,495.37
ANSWER:
b
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
23. Your bank offers a savings account that pays 3.5% interest, compounded annually. If you invest $1,000 in the account,
then how much will it be worth at the end of 25 years?
a.
$2,245.08
b.
$2,363.24
c.
$2,481.41
d.
$2,605.48
e.
$2,735.75
ANSWER:
b
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
24. Your bank offers a savings account that pays 3.5% interest, compounded annually. How much will $500 invested
today be worth at the end of 25 years?
a.
$1,122.54
b.
$1,181.62
c.
$1,240.70
d.
$1,302.74
e.
$1,367.88
ANSWER:
b
POINTS:
1
QUESTION TYPE:
Multiple Choice
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.02 – LO: 28-2
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE MODIFIED:
1/10/2018 11:50 AM
25. If the discount (or interest) rate is positive, the present value of an expected series of payments will always exceed the
future value of the same series.
a.
True
b.
False
ANSWER:
False
HAS VARIABLES:
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
TOPICS:
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
POINTS:
1
Difficulty: Easy
QUESTION TYPE:
False
LEARNING OBJECTIVES:
NATIONAL STANDARDS:
LOCAL STANDARDS:
26. If the discount (or interest) rate is positive, the future value of an expected series of payments will always exceed the
present value of the same series.
a.
True
b.
False
ANSWER:
True
1
DIFFICULTY:
QUESTION TYPE:
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
LOCAL STANDARDS:
KEYWORDS:
10/30/2017 8:17 PM
DATE MODIFIED:
27. Disregarding risk, if money has time value, it is impossible for the present value of a given sum to exceed its future
value.
a.
True
b.
False
ANSWER:
True
DIFFICULTY:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
TOPICS:
KEYWORDS:
10/30/2017 8:17 PM
DATE MODIFIED:
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Page 14
28. Disregarding risk, if money has time value, it is impossible for the future value of a given sum to exceed its present
value.
a.
True
b.
False
ANSWER:
False
1
DIFFICULTY:
True / False
IFMG.DAVE.19.28.03 – LO: 28-3
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Bloom?s: Knowledge
10/30/2017 8:17 PM
DATE MODIFIED:
29. The present value of a future sum decreases as either the discount rate or the number of periods per year increases,
other things held constant.
a.
True
b.
False
ANSWER:
True
1
DIFFICULTY:
True / False
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
10/30/2017 8:17 PM
DATE MODIFIED:
30. The present value of a future sum increases as either the discount rate or the number of periods per year increases,
other things held constant.
a.
True
b.
False
Bloom?s: Knowledge
DATE CREATED:
1/10/2018 11:50 AM
Chapter 28: Time Value of Money
Copyright Cengage Learning. Powered by Cognero.
Page 15
ANSWER:
False
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
True / False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Comprehension
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
31. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected
cash flows. Which of the following would lower the calculated value of the investment?
a.
The discount rate decreases.
b.
The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity
lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000.
c.
The discount rate increases.
d.
The riskiness of the investment’s cash flows decreases.
e.
The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years
and less are received in the later years.
ANSWER:
c
POINTS:
1
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
Effects of factors on PVs
KEYWORDS:
Bloom?s: Analysis
TYPE: Multiple Choice: Conceptual
calculations. Please see the “Answers & Solutions” section to see calculation requirements
for this question.
DATE CREATED:
10/30/2017 8:17 PM
1/10/2018 11:50 AM
32. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected
cash flows. Which of the following would increase the calculated value of the investment?
a.
The discount rate increases.
b.
The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity
Chapter 28: Time Value of Money
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
LOCAL STANDARDS:
United States – OH – Default City – TBA
lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000.
c.
The discount rate decreases.
d.
The riskiness of the investment’s cash flows increases.
e.
The total amount of cash flows remains the same, but more of the cash flows are received in the later years and
less are received in the earlier years.
ANSWER:
c
POINTS:
1
DIFFICULTY:
Difficulty: Moderate
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Effects of factors on PVs
KEYWORDS:
Bloom?s: Analysis
OTHER:
TYPE: Multiple Choice: Conceptual
calculations. Please see the “Answers & Solutions” section to see calculation requirements
for this question.
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
33. Suppose a State of North Carolina bond will pay $1,000 ten years from now. If the going interest rate on these 10-year
bonds is 5.5%, how much is the bond worth today?
a.
$585.43
b.
$614.70
c.
$645.44
d.
$677.71
e.
$711.59
ANSWER:
a
34. Suppose a State of New Mexico bond will pay $1,000 eight years from now. If the going interest rate on these 8-year
bonds is 5.5%, how much is the bond worth today?
a.
$651.60
b.
$684.18
c.
$718.39
d.
$754.31
e.
$792.02
ANSWER:
a
POINTS:
1
QUESTION TYPE:
Multiple Choice
False
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
LOCAL STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE MODIFIED:
1/10/2018 11:50 AM
35. How much would $20,000 due in 50 years be worth today if the discount rate were 7.5%?
a.
$438.03
b.
$461.08
c.
$485.35
d.
$510.89
e.
$537.78
ANSWER:
e
TOPICS:
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
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Page 18
36. You expect to receive $5,000 in 25 years. How much is it worth today if the discount rate is 5.5%?
a.
$1,067.95
b.
$1,124.16
c.
$1,183.33
d.
$1,245.61
e.
$1,311.17
ANSWER:
e
1
DIFFICULTY:
Multiple Choice
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
TYPE: Multiple Choice: Problem
DATE CREATED:
1/10/2018 11:50 AM
37. The going rate of interest on a 5-year treasury bond is 4.25%. You have one that will pay $2,500 five years from now.
How much is the bond worth today?
a.
$1,928.78
b.
$2,030.30
1
DIFFICULTY:
Multiple Choice
False
LEARNING OBJECTIVES:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – OH – Default City – TBA
KEYWORDS:
TYPE: Multiple Choice: Problem
DATE CREATED:
1/10/2018 11:50 AM
Chapter 28: Time Value of Money
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
LOCAL STANDARDS:
United States – OH – Default City – TBA
c.
$2,131.81
d.
$2,238.40
e.
$2,350.32
ANSWER:
b
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
Multiple Choice
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.03 – LO: 28-3
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
38. Suppose a Google.com bond will pay $4,500 ten years from now. If the going interest rate on safe 10-year bonds is
4.25%, how much is the bond worth today?
a.
$2,819.52
b.
$2,967.92
c.
$3,116.31
d.
$3,272.13
e.
$3,435.74
ANSWER:
b
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Page 20
39. If a bank compounds savings accounts quarterly, the nominal rate will exceed the effective annual rate.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.15 – LO: 28-15
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Effective annual rate
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
40. If a bank compounds savings accounts quarterly, the effective annual rate will exceed the nominal rate.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Difficulty: Easy
QUESTION TYPE:
True / False
HAS VARIABLES:
False
LEARNING OBJECTIVES:
IFMG.DAVE.19.28.15 – LO: 28-15
NATIONAL STANDARDS:
United States – BUSPROG: Analytic
STATE STANDARDS:
United States – AK – DISC: Time value of money
LOCAL STANDARDS:
United States – OH – Default City – TBA
TOPICS:
Effective annual rate
KEYWORDS:
Bloom?s: Knowledge
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM
41. If we are given a periodic interest rate, say a monthly rate, we can find the nominal annual rate by multiplying the
periodic rate by the number of periods per year.
a.
True
b.
False
TOPICS:
KEYWORDS:
Bloom?s: Application
OTHER:
TYPE: Multiple Choice: Problem
DATE CREATED:
10/30/2017 8:17 PM
DATE MODIFIED:
1/10/2018 11:50 AM