62) To save for her newborn son’s college education, Lea Wilson will invest $1,000 at the end of
each year for the next 20 years. The interest rate is 10%. What is the future value?
A) $8,514
B) $2,980
C) $63,440
D) $57,275
63) To save for a new car, Samuel Smith will invest $3,000 at the end of each year for the next 5
years. The interest rate is 8%. What is the future value?
A) $15,000
B) $2,980
C) $17,601
D) $13,518
64) If you were to put $1,000 in the bank at 6% interest each year for the next 10 years, which
table would you use to find the ending balance in your account?
A) Present value of $1
B) Future value of $1
C) Present value of an annuity of $1
D) Future value of an annuity of $1
65) If you were to put $1,000 in the bank at 6% interest each year for the next 10 years, how
much would you have as an ending balance in your account?
A) $6,975
B) $15,937
C) $7,716
D) $13,181
66) The interest factor (IF) for the future value of an ordinary annuity is 4.641 at 10% for four
years. If we wish to accumulate $8,000 by the end of four years, how much should the annual
payments be?
A) $2,500
B) $2,000
C) $1,724
D) $37,128
67) Mr. Blochirt is creating a college investment fund for his daughter. He will put in $1,000 per
year for the next 5 years starting one year from now and expects to earn a 6% annual rate of
return. How much money will his daughter have when she starts college?
A) $4,212
B) $12,263
C) $5,000
D) $5,637
68) Mr. Nailor invests $5,000 in a money market account at his local bank. He receives annual
interest of 8% compounded for four years. How much total return will his investment earn during
this time period?
A) $3,675
B) $1,800
C) $6,254
D) $8,570
69) Lou Lewis borrows $10,000 to be completely repaid over 10 years at 8%. Repayment of
principal in the first year is ________.
A) $1,493
B) $693
C) $690
D) $885
70) Sharon Smith will receive $1 million in 20 years. The discount rate is 10%. As an alternative,
she can receive $200,000 today. Which should she choose?
A) The $200,000 today.
B) The $1 million in 20 years.
C) Both equal the same value.
D) Neither option would be preferred.
71) Pedro Gonzalez will invest $5,000 at the end of each year. If the interest rate is 8%, what will
the value be after three years?
A) $12,885
B) $6,300
C) $16,230
D) $15,400
72) Ambrin Corp. expects to receive $2,000 at the end of each year for 10 years. Then the
corporation expects to receive $3,500 per year for the following 10 years, at the end of each year.
What is the approximate present value of this 20-year cash flow? Use an 8% discount rate.
A) $24,294
B) $27,870
C) $32,389
D) $2,547
73) Fishermen’s Corp. is considering purchasing a boat. If the boat was purchased, it is expected
to receive $20,000 at the end of the first year, $40,000 at the end of the second year, and $60,000
at the end of the third year within its business. What is the boat worth to Fishermen’s Corp today,
assume an 8% discount rate.
A) $120,000
B) $100,440
C) $47,640
D) $98,756
74) Dr. J. wants to buy a Dell computer that will cost $3,000 three years from today. He would
like to set aside an equal amount at the end of each year in order to accumulate the amount
needed. He can earn an 8% annual return. How much should he set aside at the end of each year?
A) $879
B) $627
C) $924
D) $9,738
75) Mr. Fish wants to build a house in ten years. He estimates that the total cost will be
$150,000. If he can put aside $10,000 at the end of each year, what rate of return must he earn in
order to have the amount needed?
A) Between 8% and 10%
B) Between 6% and 8%
C) Above 10%
D) Between 4% and 6%
76) Babe Ruth Jr. has agreed to play for the Cleveland Indians for $3 million per year for the
next 10 years. What table would you use to calculate the value of this contract in today’s dollars?
A) Present value of an annuity
B) Present value of a single amount
C) Future value of an annuity
D) Future value of a dollar
77) Football player Walter Johnson signs a contract calling for payments of $250,000 per year,
which begins 10 years from now and then continue for five more years after that. To find the
value of this contract today, which table or tables should you use?
A) The future value of $1
B) The future value of an annuity of $1 and the future value of $1
C) The present value of an annuity of $1 and the present value of $1
D) The present value of $1 and the future value of $1
78) Mike Carlson will receive $12,000 a year from the end of the third year to the end of the 12th
year (10 payments). The discount rate is 10%. The present value today of this deferred annuity is
________.
A) $61,450
B) $42,185
C) $60,909
D) $55,379
79) The shorter the length of time between a present value and its corresponding future value,
A) the lower the present value, relative to the future value.
B) the higher the present value, relative to the future value.
C) the higher the interest rate used in the discounting to the present value.
D) None of these options are correct.
80) A dollar today is worth more than a dollar to be received in the future because
A) a stated rate of return is guaranteed on all investment opportunities.
B) the dollar can be invested today and earn interest.
C) inflation will increase the purchasing power of a future dollar.
D) None of these options are true.
81) The higher the interest rate used in determining the future value of a $1 annuity,
A) the smaller the future value at the end of the period.
B) the greater the future value at the end of a period.
C) the greater the present value at the beginning of a period.
D) None of these options. The interest has no effect on the future value of an annuity.
82) Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago. What
is the annual return on his investment?
A) 2%
B) Between 3% and 4%
C) 10%
D) Less than 1%
83) Mr. Bubble wants to sell his bubble machine for $1,000,000, but it might take awhile before
it is valued that high. He bought it for $149,000 and is earning annual interest of 10% on the
machine. How long will Mr. Bubble have to wait before the machine is valued at $1,000,000?
A) 20 years
B) 10 years
C) 5 years
D) More than 20 years