TVM Module: Time Value of Money Module
KEYWORDS:
Bloom’s: Analyzing
56. Table factors for present values
a.
decrease as the interest rate decreases
b.
decrease as the number of periods increases
c.
increase as the interest rate increases
d.
increase as the number of periods increases
b
POINTS:
1
DIFFICULTY:
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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KEYWORDS:
Bloom’s: Remembering
57. All of the following are conditions for an ordinary annuity except
a.
periodic cash flows must be equal in amount
b.
the time periods between the cash flows are the same length
c.
the interest rate is constant for each time period
d.
interest is compounded in the middle of each time period
d
POINTS:
1
DIFFICULTY:
Easy
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NATIONAL STANDARDS:
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
KEYWORDS:
Bloom’s: Remembering
58. All of the following are conditions for an ordinary annuity due except
a.
periodic cash flows must be equal in amount.
b.
the time periods between the cash flows are the same length.
c.
the future value is equal to the present value.
d.
interest is compounded at the end of each time period.
c
POINTS:
1
DIFFICULTY:
Easy
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NATIONAL STANDARDS:
United States – BUSPROG – BUSPROG: Analytic
KEYWORDS:
Bloom’s: Analyzing
TVM Module: Time Value of Money Module
59. All of the following are conditions for an annuity due except
a.
periodic cash flows must be equal in amount.
b.
the time periods between the cash flows are the same length.
c.
the interest rate is constant for each time period.
d.
interest is compounded at the end of each time period.
d
1
Easy
ACCT.WHAL.TVM.4 – LO: TVM.4
United States – BUSPROG – BUSPROG: Analytic
Bloom’s: Analyzing
60. An annuity is a series of
a.
b.
c.
d.
d
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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TVM Module: Time Value of Money Module
61. What is the formula for the future value of an ordinary annuity?
a.
b.
c.
d.
a
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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62. Jacob Sawyer will deposit $3,000 into a special account each year beginning December 31, 2016, with the last deposit
being made on December 31, 2019. Jacob wants to know how much will be in his account on December 31, 2019,
immediately after the final deposit, if the account earns 10% compounded annually. To solve the problem, Jacob must
find the future value of
a.
a single sum.
b.
a deferred annuity.
c.
an ordinary annuity.
d.
an annuity due.
c
1
Easy
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
TVM Module: Time Value of Money Module
63. Georgia deposits $4,000 every three months for five years. The first deposit is made on March 31, 2016, and the last
deposit is made on December 31, 2020. The fund earns 16% and interest is compounded quarterly. How much money
will Georgia have on December 31, 2020, immediately after her last deposit? Factors for future value of an annuity of
$1 are
a.
$123,876
b.
$119,112
c.
$110,034
d.
$107,508
b
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPORG: Analytic
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64. At the beginning of 2017, Laura Company issued 10-year bonds with a face value of $4,000,000 due on December 31,
2022. The company will accumulate a fund to retire these bonds at maturity. It will make ten annual deposits to the
fund beginning on December 31, 2017. How much must the company deposit each year, assuming that it will earn
12% interest compounded annually?
a.
$363,636.36
b.
$227,936.65
c.
$226,008.92
d.
$203,514.87
b
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
TVM Module: Time Value of Money Module
65. Currently (in August, 2017), Abby wants to have $20,000 available in August 2021 to make a college tuition payment.
To be able to have this amount available, Abby will make equal annual deposits in an investment account earning
12% annually in August 2017,2018,2019,2020,and 2021. What is the annual amount to be deposited?
a.
$5,548
b.
$4,000
c.
$3,148
d.
$2,270
c
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
66. Currently (on January 1, 2017), Nolan wants to have $45,000 available on December 31 2022 to purchase a luxury
car. To be able to have this amount available, Nolan will make equal quarterly deposits for the next six years in an
investment account earning a 16% annual return compounded quarterly. Nolan will make these deposits at the end of
March, June, September, and December. What is the amount to be deposited quarterly for the next six years that will
provide for a $45,000 balance at the end of 2022?
a.
$1,875
b.
$1,253
c.
$1,151
d.
$210
c
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPROG – BUSPROG: Analytic
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Bloom’s: Analyzing
67. Jackie’s parents loaned her $80,000 to fund her college education. Her parents are not charging interest. They desire to
be paid one lump sum of $80,000 when Jackie can accumulate that amount. Jackie established a savings plan that
earns 8% compounded annually. Her new job promises to pay an annual holiday bonus that will enable her to make
equal annual, year-end deposits of $6,400. Approximately how many years will it take Jackie to accumulate the
$80,000?
a.
8 years
b.
8.5 years
c.
9 years
d.
12.5 years
c
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPORG: Analytic
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68. Jeff desires to accumulate $13,603.83 by December 1, 2018. To accumulate that sum, he will make six equal
semiannual deposits of $2,000, beginning on June 1, 2016, into a fund that earns interest compounded semiannually.
What annual rate of interest must the fund provide to yield the desired sum?
a.
5%
b.
6%
c.
10%
d.
12%
c
1
Moderate
ACCT.WHAL.TVM.5 – LO: TVM.5
United States – BUSPORG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
TVM Module: Time Value of Money Module
69. Anne wants to accumulate $25,000 by December 31, 2019. To accumulate that sum, she will make twelve equal
quarterly deposits of $1,616.66 at the end of March, June, September, and December, beginning on March 31, 2016,
into a fund that earns interest compounded quarterly. What annual rate of interest must the fund provide to yield the
desired sum?
a.
4.5%
b.
6.5%
c.
18%
d.
26%
c
1
Moderate
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United States – BUSPROG – BUSPROG: Analytic
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Bloom’s: Analyzing
70. Using the table approach, the future amount of an annuity due may be calculated by finding the table factor for the
future amount of an ordinary annuity of
a.
n + 1 and then subtract 1.
b.
n + 1 and then add 1.
c.
n – 1 and then add 1.
d.
n – 1 and then subtract 1.
a
1
Moderate
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71. The future amount of an annuity due is determined
a.
one period after the last cash flow in the series.
b.
one period before the last cash flow in the series.
c.
at the same time as the last cash flow in the series.
d.
one period after the next cash flow in the series.
a
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
TVM Module: Time Value of Money Module
72. Jessie’s Dry Cleaner began making $2,000 equal, annual deposits in a fund starting on January 2, 2016. The fund earns
10% compounded annually, and the last deposit is made on January 2, 2020. How much will be in the fund on January
2, 2021, one year after the final deposit?
a.
$15,000
b.
$13,431
c.
$12,105
d.
$10,641
b
1
Moderate
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United States – BUSPORG: Analytic
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73. You deposit in a fund 10 annual payments of $2,500 each beginning January 1, 2016, with the last deposit being made
on January 1, 2025. How much will be in the fund on December 31, 2025, one year after the final payment, if the fund
earns interest at 4% compounded annually?
a.
$21,088
b.
$28,957
c.
$30,015
d.
$31,216
d
1
Moderate
ACCT.WHAL.TVM.6 – LO: TVM.7
United States – BUSPROG – BUSPROG: Analytic
United States – OH – Default City – AICPA – FN-Decision Modeling
Bloom’s: Analyzing
TVM Module: Time Value of Money Module
74. On January 2, 2016, Christopher inherited a trust fund that he could use for college tuition. Christopher hopes to make
five equal withdrawals of $40,000 each year for the next five years from the fund that will earn 10% compounded
annually. The first withdrawal will be made on January 2, 2017. How much does he need to have invested in the fund
on January 2, 2016, to be able to withdraw the needed amounts each year?
a.
$151,631
b.
$200,000
c.
$244,204
d.
$268,624
a
1
Easy
ACCT.WHAL.TVM.6 – LO: TVM.7
United States – BUSPORG: Analytic
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75. Stephen Michaels wants to know how much he must deposit today at 12% interest to provide three equal annual
withdrawals of $10,000, beginning one year from now. This is an example of the present value of
a.
an ordinary annuity.
b.
an annuity due.
c.
a single sum.
d.
a deferred annuity.
a
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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TVM Module: Time Value of Money Module
76. You would like to deposit a sum of money today that would enable you to withdraw $2,000 a year for ten years. If the
interest paid on the amount deposited is 10% compounded annually and if the first withdrawal is made one year from
today, the formula you would use to determine the amount of the initial deposit is the
a.
present value of a deferred annuity.
b.
present value of an annuity due.
c.
present value of an ordinary annuity.
d.
future value of an ordinary annuity.
c
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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77. In order to measure the carrying value of investments in bonds, which of the following time value of money concepts
is used?
a.
the present value of an ordinary annuity
b.
the future value of a single sum
c.
the future value of an ordinary annuity
d.
all of these
a
1
Easy
ACCT.WHAL.TVM.7 – LO: TVM.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
TVM Module: Time Value of Money Module
78. What is the formula for the present value of an ordinary annuity of 1?
a.
b.
c.
d.
d
1
Easy
ACCT.WHAL.TVM.7 – LO: TVM.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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79. In the present value of an annuity table, the factors.
a.
increase as the interest rates increase.
b.
decrease as the periods increase.
c.
increase as the periods decrease.
d.
d
1
Easy
ACCT.WHAL.TVM.7 – LO: TVM.7
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Decision Modeling
decrease as the interest rates increase.
80. Savannah has just won the state lottery. She will receive ten equal annual payments of $15,000, beginning one year
from today. Assuming an 8% interest rate compounded annually, the present value of those receipts today is
a.
$80,913.
b.
$100,651.
c.
$108,703.
d.
$102,000.
b
1
Easy
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United States – BUSPORG: Analytic
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81. On January 31, 2016, Manning Company acquired a new machine by paying $40,000 cash and agreeing to pay
$20,000 annually for four years, beginning on January 31, 2017. Assuming an interest rate of 10%, Manning should
record the acquisition cost of the machine on January 31, 2016, at
a.
$120,000.
b.
$109,737.
c.
$103,397.
d.
$102,092.
c
1
Moderate
ACCT.WHAL.TVM.7 – LO: TVM.7
United States – BUSPORG: Analytic
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TVM Module: Time Value of Money Module
82. Charlie’s Construction Co. acquired a new $800,000 backhoe on April 1, 2014. Charlie’s will make six annual
payments based upon 8% interest compounded annually, starting on March 31, 2015. How much will each payment
be?
a.
$504,136
b.
$173,052
c.
$160,234
d.
$109,052
b
1
Moderate
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United States – BUSPORG: Analytic
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83. Stacey has $5,000,000 on deposit in a fund that earns 9% interest compounded annually. How much can Stacey
withdraw annually from the fund in ten equal annual withdrawals to completely deplete the fund after the tenth draw,
assuming the first withdrawal occurs one year from today?
a.
$450,000
b.
$714,771
c.
$779,100
d.
$555,555
c
1
Moderate
ACCT.WHAL.TVM.7 – LO: TVM.7
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Bloom’s: Analyzing
TVM Module: Time Value of Money Module
84. On September 1, 2014, Watson Company received a loan of $44,940 from One Finance Company. To pay off this
loan, Watson Company will have to pay One Finance $10,000 each year for ten years. The first payment is due
September 1, 2015. Which interest rate compounded annually is Watson paying on this loan?
a.
12%
b.
15%
c.
18%
d.
24%
c
1
Easy
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United States – BUSPORG: Analytic
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85. David Company borrowed $550,000 on December 31, 2014. The loan will be paid with six equal annual payments of
$115,388, beginning on December 31, 2015. The rate of interest compounded annually for the loan is most nearly
equal to
a.
9%.
b.
8%.
c.
7%.
d.
6%.
c
1
Moderate
ACCT.WHAL.TVM.7 – LO: TVM.7
United States – BUSPORG: Analytic
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TVM Module: Time Value of Money Module
86. What is the formula for the present value of an annuity due?
a.
b.
c.
d.
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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87. To determine the converted table factor for the present value of an annuity due, one must find the factor for the present
value of an ordinary annuity for
a.
n + 1 and then subtract 1.
b.
n − 1 and then subtract 1.
c.
n + 1 and then add 1.
d.
n − 1 and then add 1.
d
1
Easy
ACCT.WHAL.TVM.8 – LO: TVM.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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TVM Module: Time Value of Money Module
88. For which of the following transactions would the present value of an annuity due concept be most appropriate for
calculating the present value of the asset acquired or liability assumed?
a.
b.
c.
d.
a
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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89. On July 7, 2014, Lawrence Company sold some machinery to Johnson Construction Company. The sales contract
requires Johnson to pay five equal annual payments of $75,000 each, beginning on July 7, 2014. What present value
concept is most appropriate for this situation?
a.
present value of an annuity due of $1 for five periods
b.
present value of an ordinary annuity of $1 for five periods
c.
future value of an annuity of $1 for five periods
d.
a
1
Easy
ACCT.WHAL.TVM.8 – LO: TVM.8
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
United States – OH – Default City – AICPA: FN-Measurement
future value of $1 for five periods
TVM Module: Time Value of Money Module
90. Stacey has $5,000,000 on deposit in a fund that earns 9% interest compounded annually. How much can Stacey
withdraw annually from the fund in ten equal annual withdrawals to completely deplete the fund after the tenth draw,
assuming the first withdrawal occurs today?
a.
$714,771
b.
$779,100
c.
$861,298
d.
$922,908
a
1
Easy
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United States – BUSPORG: Analytic
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91. Samuel just inherited an annuity. He will receive six equal annual payments of $18,000, beginning today. Assuming a
10% interest rate compounded annually, the present value today of all receipts is
a.
$64,886.
b.
$78,395.
c.
$86,234.
d.
$75,058.
c
1
Easy
ACCT.WHAL.TVM.8 – LO: TVM.8
United States – BUSPORG: Analytic
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TVM Module: Time Value of Money Module
92. On June 1, 2016, Molser Company acquired a new machine by agreeing to pay five equal annual payments of
$20,000, with the first payment due that day. Assuming an interest rate of 14% compounded annually, Molser should
record the acquisition cost of the machine as
a.
$68,662.
b.
$78,274.
c.
$87,719.
d.
$100,000.
b
1
Easy
ACCT.WHAL.TVM.8 – LO: TVM.8
United States – BUSPORG: Analytic
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93. Norah has $2,000,000 in her retirement account. She wants to make 20 equal withdrawals, beginning today and each
year thereafter. The investment plan earns 8%. What is the amount of annual withdrawals that would completely
deplete the fund after the 20th withdrawal?
a.
$181,541
b.
$184,875
c.
$188,615
d.
$203,704
c
1
Easy
ACCT.WHAL.TVM.8 – LO: TVM.8
United States – BUSPORG: Analytic
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TVM Module: Time Value of Money Module
94. Raymond’s Leasing Company signed an agreement to lease an asset that has a fair value of $800,000 on December 31,
2014. The lease will be paid in seven equal annual payments of $138,730, beginning on December 31, 2014. The
interest rate included in the lease agreement is most nearly equal to
a.
8%.
b.
7%.
c.
6%.
d.
5%.
b
1
Moderate
ACCT.WHAL.TVM.8 – LO: TVM.8
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95. When the present value of an annuity is calculated as of two or more periods before the payment of the first cash flow,
the annuity is
a.
an ordinary annuity.
b.
a deferred ordinary annuity.
c.
a compound annuity due.
d.
a compound ordinary annuity.
b
1
Easy
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United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
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96. Parker Posie wants to determine how much she must deposit today at 14% interest to provide four withdrawals of
$26,000 at the end of each year, beginning five years from now. This is an example of the present value of
a.
an ordinary annuity.
b.
an annuity due.
c.
a compound annuity due.
d.
a deferred ordinary annuity.
d
1
Easy
ACCT.WHAL.TVM.9 – LO: TVM.9
United States – BUSPROG: Reflective Thinking – BUSPROG: Analytic
TVM Module: Time Value of Money Module
97. Joshua desires to purchase an annuity on January 1, 2014, that yields him five annual cash flows of $10,000 each, with
the first cash flow to be received on January 1, 2017. The interest rate is 10% compounded annually. The cost (present
value) of the annuity on January 1, 2014, is
a.
$31,328.81.
b.
$34,461.70.
c.
$37,907.87.
d.
$48,684.19.
a
1
Moderate
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98. Marcus Jones wants to invest $10,000 on January 1, 2014, so that he may withdraw 10 annual payments of equal
amounts beginning January 1, 2029. If the fund earns 10% annual interest over its life, what will be the amount of
each of the withdrawals?
a.
$10,000
b.
$14,709
c.
$16,181
d.
$28,402
c
1
Moderate
ACCT.WHAL.TVM.9 – LO: TVM.9
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