Question 1

An investor expects the price of a stock to double after eight years.What is the expected annual rate of growth?

Accepted Answer

The answer of An investor expects the price of a...

Question 2

A firm currently earns $1.00 per share.A financial analyst believes that earnings will grow annually at the rate of 10 percent for five years and then decline to 5 percent.What are the expected earnings after ten years?

Accepted Answer

The answer of A firm currently earns $1.00 per share.A...

Question 3

Time value concepts may be used to determine
1)the annual growth rate in dividends
2)the amount in an IRA account after ten years
3)the tax owed on a capital gain
A) 1 and 2
B) 1 and 3
C) 2 and 3
D) only 2

Accepted Answer

Time value concepts, such as present value and future value, can be used to determine the annual growth rate in dividends and the amount in an IRA account after ten years. However, they are not typically used to calculate the tax owed on a capital gain.

Question 4

The future value of an annuity will be larger if
1)the annuity is an ordinary annuity
2)the annuity is an annuity due
3)the payments are made at the beginning of the year
4)the payments are made at the end of the year
A) 1 and 3
B) 1 and 4
C) 2 and 3
D) 2 and 4

Accepted Answer

An annuity due, where payments are made at the beginning of each period (3), will have a larger future value than an ordinary annuity, where payments are made at the end of each period, because each payment is invested for an additional period.

Question 5

Time value concepts may not be used to determine
A) the present value of an annuity
B) the margin required on a stock purchase
C) the future value of $100 deposited in a bank
D) the present value of a lump sum

Accepted Answer

Time value concepts are typically used in financial calculations related to the present and future values of money, including annuities and lump sums. However, they are not typically used to determine margin requirements on stock purchases, which are based on factors such as market volatility and the investor's risk tolerance.

Question 6

You wish to have $100,000 after ten years to buy a nice boat.How much must you invest at the end of each year if you earn 8 percent annually on your funds?

Accepted Answer

The answer of You wish to have $100,000 after ten...

Question 7

An investment offers $10,000 at the end of each year for ten years.(a)If you can earn 10 percent annually,what is this investment worth today? (b)If you do not spend the annual payment but invest it at 10 percent,how much will you have after the ten years have lapsed?

Accepted Answer

The answer of An investment offers $10,000 at the end...

Question 8

A piece of rental property will generate $10,000 a year for five years,$12,000 for the next five years,and then be sold at the end of the tenth year for $100,000.If you can earn 10 percent on your funds,what is the maximum you should pay for the property?

Accepted Answer

The answer of A piece of rental property will generate...

Question 9

If you open an IRA and invest $2,000 a year (at the end of the year),how much will be in the account after twenty-five years if the funds earn 10 percent annually? How much would be in the account if payments were made at the beginning of the year?

Accepted Answer

The answer of If you open an IRA and invest...

Question 10

Worker A annually invests $1,000 in an IRA for nine years (ages 27 through 35)and never makes another contribution.Worker B annually invests $1,000 in an IRA for thirty years (ages 36 through 65).Which worker will have more in his or her account when he or she retires if they both earn 8 percent on their investments?

Accepted Answer

The answer of Worker A annually invests $1,000 in an...

Question 11

Flight National's capacity is 120 passengers per flight.It currently carries 74 passengers per flight.Growth in passengers is expected to be 6 percent annually.New planes will have to be ordered when the company is carrying 90 percent of capacity.How long will it be before the firm must order new planes?

Accepted Answer

The answer of Flight National's capacity is 120 passengers per...

Question 12

A state's lottery winner is promised $200,000 a year for twenty years (starting at the end of the first year).How much must the state invest now to guarantee the prize if the state can earn annually 7 percent on its funds? How much must the state invest if the annual payments were made at the beginning of the year?

Accepted Answer

The answer of A state's lottery winner is promised $200,000...

Question 13

Your uncle plans to leave you an inheritance of $200,000.If his life expectancy is twenty years,and the annual rate of interest is 9 percent,what is your inheritance currently worth?

Accepted Answer

The answer of Your uncle plans to leave you an...

Question 14

You are hurt in a car accident and your lawyer wins a $100,000 settlement to be distributed as follows:
$20,000 immediate payment
$5,000 a year for ten years starting now
$30,000 after ten years.
If the lawyer's fee is $10,000,what is the value of this settlement if the interest rate is 10 percent?

Accepted Answer

The answer of You are hurt in a car accident...

Question 15

A homeowner has a ten-year home-improvement loan for $36,875.What are the annual payments required by the loan if the annual rate of interest is 10 percent?

Accepted Answer

The answer of A homeowner has a ten-year home-improvement loan...

Quiz 4: The Time Value of Money

An investor expects the price of a stock to double after eight years.What is the expected annual rate of growth?

A firm currently earns $1.00 per share.A financial analyst believes that earnings will grow annually at the rate of 10 percent for five years and then decline to 5 percent.What are the expected earnings after ten years?

Time value concepts may be used to determine 1) the annual growth rate in dividends 2) the amount in an IRA account after ten years 3) the tax owed on a capital gain

The future value of an annuity will be larger if 1) the annuity is an ordinary annuity 2) the annuity is an annuity due 3) the payments are made at the beginning of the year 4) the payments are made at the end of the year

Time value concepts may not be used to determine