Ch 04 Time Value of Money
d.
An account that pays 7% nominal interest with daily (365-day) compounding.
e.
An account that pays 7% nominal interest with monthly compounding.
66. Which of the following bank accounts has the lowest effective annual return?
a.
An account that pays 8% nominal interest with daily (365-day) compounding.
b.
An account that pays 8% nominal interest with monthly compounding.
c.
An account that pays 8% nominal interest with annual compounding.
d.
An account that pays 7% nominal interest with daily (365-day) compounding.
e.
An account that pays 7% nominal interest with monthly compounding.
Ch 04 Time Value of Money
Difficulty: Challenging
Multiple Choice
FMTP.EHRH.17.04.15 – LO: 4-15
United States – BUSPROG: Analytic
United States – AK – DISC: Time value of money
United States – OH – Default City – TBA
Effective annual rate
TYPE: Multiple Choice: Conceptual
8/26/2015 10:44 AM
8/26/2015 10:44 AM
67. You plan to invest some money in a bank account. Which of the following banks provides you with the highest
effective rate of interest?
a.
Bank 1; 6.1% with annual compounding.
b.
Bank 2; 6.0% with monthly compounding.
c.
Bank 3; 6.0% with annual compounding.
d.
Bank 4; 6.0% with quarterly compounding.
e.
Bank 5; 6.0% with daily (365-day) compounding.
Difficulty: Challenging
Multiple Choice
FMTP.EHRH.17.04.15 – LO: 4-15
Ch 04 Time Value of Money
68. 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
False
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Ch 04 Time Value of Money
69. 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
False
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70. 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
a
Ch 04 Time Value of Money
71. 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
a
False
False
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Ch 04 Time Value of Money
72. 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
c
False
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73. 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
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Ch 04 Time Value of Money
d.
$983.14
e.
$1,032.30
c
False
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74. 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
False
Ch 04 Time Value of Money
75. 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
False
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76. Your bank offers a savings account that pays 3.5% interest, compounded annually. If you invest $1,000 in the account,
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Ch 04 Time Value of Money
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
False
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77. 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
Ch 04 Time Value of Money
78. 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
a
False
False
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Ch 04 Time Value of Money
79. 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
a
False
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80. 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
e
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Ch 04 Time Value of Money
81. 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
e
False
False
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Ch 04 Time Value of Money
82. 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
c.
$2,131.81
d.
$2,238.40
e.
$2,350.32
False
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83. 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
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Ch 04 Time Value of Money
b.
$2,967.92
c.
$3,116.31
d.
$3,272.13
e.
$3,435.74
False
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84. You have just purchased a U.S. Treasury bond for $747.25. No payments will be made until the bond matures 5 years
from now, at which time it will be redeemed for $1,000. What interest rate will you earn on this bond?
a.
4.37%
b.
4.86%
c.
5.40%
d.
6.00%
e.
6.60%
Ch 04 Time Value of Money
85. You have purchased a U.S. Treasury bond for $3,000. No payments will be made until the bond matures 10 years
from now, at which time it will be redeemed for $5,000. What interest rate will you earn on this bond?
a.
3.82%
b.
4.25%
c.
4.72%
d.
5.24%
e.
5.77%
False
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CO41-4CTA-CT1D-OPTO-CTDI-GWN8-EPRW-EMJU-CC4D-NAUG-CR4D-O3UF-CESS–
False
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Ch 04 Time Value of Money
86. Ten years ago, Kronan Corporation earned $0.50 per share. Its earnings this year were $2.20. What was the growth
rate in earnings per share (EPS) over the 10-year period?
a.
15.17%
b.
15.97%
c.
16.77%
d.
17.61%
e.
18.49%
False
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87. Wildwoods, Inc. earned $1.50 per share five years ago. Its earnings this year were $3.20. What was the growth rate in
earnings per share (EPS) over the 5-year period?
a.
15.54%
b.
16.36%
c.
17.18%
d.
18.04%
e.
18.94%
Ch 04 Time Value of Money
88. You have $5,000 invested in a bank that pays 3.8% annually. How long will it take for your funds to triple?
a.
23.99
b.
25.26
c.
26.58
d.
27.98
e.
29.46
e
False
False
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Ch 04 Time Value of Money
89. Your bank pays 4% interest annually. You have $2,500 invested in the bank. How long will it take for your funds to
double?
a.
14.39
b.
15.15
c.
15.95
d.
16.79
e.
17.67
e
False
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90. Brockman Corporation’s earnings per share were $3.50 last year, and its growth rate during the prior 5 years was 9.0%
per year. If that growth rate were maintained, how many years would it take for Brockman’s EPS to triple?
a.
9.29
b.
10.33
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Ch 04 Time Value of Money
c.
11.47
d.
12.75
e.
14.02
False
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91. Your investment account pays 8.0%, compounded annually. If you invest $5,000 today, how many years will it take
for your investment to grow to $9,140.20?
a.
5.14
b.
5.71
c.
6.35
d.
7.05
e.
7.84
e
False
Ch 04 Time Value of Money
92. Your investment advisor has recommended your invest in bonds that pay 6.0%, compounded annually. If you invest
$10,000 today, how many years will it take for your investment to grow to $30,000?
a.
12.37
b.
13.74
c.
15.27
d.
16.97
e.
18.85
e
False
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