Question 1

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-What is the approximate present value of $500 to be received in 1 year if interest is 8 percent compounded annually?

Accepted Answer

D

Question 2

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an annual interest rate of 10 percent, what factor from the tables would be used to calculate the present value of a specified payment to be received nine years from today?

Accepted Answer

To calculate the present value of a future payment, the factor we need is the present value of $1 for a period of nine years at an annual interest rate of 10%. Looking at the present value table in Appendix 8, we find that the factor for this situation is 0.4241. Thus, the correct answer is Choice A.

Question 3

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-What is the approximate present value of $100 to be received in 2 years if interest is 10 percent compounded annually?

Accepted Answer

Look at the present value table in Appendix 8 or on the companion website. Find the row for n=2 and the column for i=10%. The present value factor is 0.826. Multiply $100 by 0.826 to get $82.60, which rounds to $83. Therefore, the approximate present value of $100 to be received in 2 years if interest is 10 percent compounded annually is $83.

Question 4

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- For a 10-year bond paying semiannual interest, how many compounding periods are there over the life of the bond?

Accepted Answer

Since the bond pays semiannual interest, there are 2 compounding periods per year. Therefore, over the 10-year life of the bond, there will be 20 compounding periods (10 years x 2 compounding periods per year).

Question 5

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Which of the following has the smallest present value?

Accepted Answer

The answer of Use the present value and future value...

Question 6

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- You are purchasing a home. You know the monthly mortgage payment amount that you can afford, and you want to calculate the corresponding mortgage total amount. The technique you will use is the

Accepted Answer

The present value of an annuity of $1 will allow us to calculate the total mortgage amount based on the monthly payment we can afford.

Question 7

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Arsenio plans to invest $10,000 at the end of each of the next ten years. Assume that Arsenio will earn interest at an annual rate of 6 percent compounded annually. The investment at the end of ten years would be (rounded)

Accepted Answer

The answer of Use the present value and future value...

Question 8

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- The present value of $2,500 to be received in 4 years when interest is 12 percent compounded quarterly is computed by discounting at

Accepted Answer

When interest is compounded quarterly, the annual interest rate is divided by 4, and the number of periods is multiplied by 4. Thus, 12% annual interest becomes 3% per quarter, and 4 years becomes 16 quarters.

Question 9

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- The two major categories of liabilities on a typical balance sheet are

Accepted Answer

The two major categories of liabilities on a typical balance sheet are Current Liabilities, which are debts that must be paid back within a year, and Long-Term Liabilities, which are debts that are due more than a year in the future. This is explained in both the present value and future value tables in Appendix 8 and on the textbook companion website.

Question 10

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- The present value of $1 discounted for 12 years at 9 percent compounded annually is 0.3555. The present value of an annuity of $1 discounted for 12 years at 9 percent compounded annually is 7.1607. Given this information, how much must be invested today so that $100 can be received each year for 12 years if money is worth 9 percent compounded annually?

Accepted Answer

The answer of Use the present value and future value...

Question 11

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Which of the following statements is FALSE?

Accepted Answer

Liabilities can be settled through various means, not just cash, such as providing services or transferring other assets.

Question 12

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-The present value of $1 discounted for 10 years at 8 percent compounded annually is 0.4632. The present value of an annuity of $1 discounted for 10 years at 8 percent compounded annually is 6.7101. Given this information, the present value of $80 to be received in 10 years at 8 percent compounded annually is

Accepted Answer

To find the present value of $80 to be received in 10 years at 8 percent compounded annually, we use the formula: 
Present Value = Future Value / (1 + i)n
where i is the interest rate and n is the number of years. 
Plugging in the values, we get: 
Present Value = $80 / (1 + 0.08)10
Present Value = $80 / 2.1589 (using the future value table)
Present Value = $37.06 (rounded to two decimal places)
Therefore, the correct choice is B.

Question 13

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- You have just purchased an automobile for $15,000 and will be financing it at 12 percent interest compounded monthly for 5 years. Your monthly payment will be

Accepted Answer

The monthly payment can be calculated using the formula for an annuity. With a principal of $15,000, an interest rate of 1% per month (12% annually), and a term of 60 months (5 years), the monthly payment is approximately $333.67.

Question 14

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an annual interest rate of 8 percent, what factor from the tables would be used to calculate the amount that should be deposited in a bank today to grow to a specified amount nine years from today?

Accepted Answer

The answer of Use the present value and future value...

Question 15

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- The present value of $1,000 to be received in 3 years when interest is 12 percent compounded quarterly is computed by discounting at

Accepted Answer

When interest is compounded quarterly, the annual interest rate is divided by 4, resulting in 3% per quarter. Over 3 years, there are 12 quarters, so the present value is calculated using 3% for 12 periods.

Question 16

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- Assuming an interest rate of 12 percent, an ordinary annuity of eight annual $30,000 payments will grow to

Accepted Answer

The future value of an ordinary annuity can be calculated using the future value of an annuity formula or table. At 12% interest for 8 years, the future value factor is approximately 13.299. Multiplying this factor by the annual payment of $30,000 gives $368,991.

Question 17

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- An investor wants to withdraw $8,000 (including principal) from an investment fund at the end of each year for 10 years. How should the investor compute the required initial investment at the beginning of the first year if the fund earns 10 percent compounded annually?

Accepted Answer

To calculate the required initial investment, we need to find the present value of an annuity with a 10 percent interest rate and 10 years of payments of $8,000 each. This can be found by multiplying $8,000 by the present value of an annuity of $1 at a 10 percent interest rate and 10 periods, which is found in the present value table in Appendix 8 or on the textbook companion website. Therefore, the correct choice is C, which states $8,000 times the present value of an annuity of $1 at a 10 percent interest rate for 10 periods.

Question 18

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
- If Cheng Corporation can invest $10,000 at 10 percent interest compounded annually, approximately how many years will it take for the $10,000 to grow to $20,000?

Accepted Answer

Using the future value table in Appendix 8 or on the textbook companion website, we can find that $10,000 invested at 10% interest compounded annually will grow to $20,000 in approximately 7.27 years. Therefore, the best choice is B, slightly more than 7 years.

Question 19

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-he present value of an annuity of $500 for 10 years at 10 percent interest compounded annually is

Accepted Answer

Using the present value of an annuity table in Appendix 8, the present value factor for an annuity of $1 per period for 10 years at 10% interest compounded annually is 6.145. Multiplying this factor by $500 gives us a present value of $3,072.50. Therefore, the present value of an annuity of $500 for 10 years at 10% interest compounded annually is less than $5,000.

Question 20

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-Which of the following has the smallest present value?

Accepted Answer

The answer of Use the present value and future value...

Quiz 10: Financing: Long-Term Liabilities

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -What is the approximate present value of $500 to be received in 1 year if interest is 8 percent compounded annually?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - Assuming an annual interest rate of 10 percent, what factor from the tables would be used to calculate the present value of a specified payment to be received nine years from today?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -What is the approximate present value of $100 to be received in 2 years if interest is 10 percent compounded annually?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - For a 10-year bond paying semiannual interest, how many compounding periods are there over the life of the bond?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Which of the following has the smallest present value?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - The present value of $2,500 to be received in 4 years when interest is 12 percent compounded quarterly is computed by discounting at

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - The two major categories of liabilities on a typical balance sheet are

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Which of the following statements is FALSE?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - You have just purchased an automobile for $15,000 and will be financing it at 12 percent interest compounded monthly for 5 years. Your monthly payment will be

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - The present value of $1,000 to be received in 3 years when interest is 12 percent compounded quarterly is computed by discounting at

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - Assuming an interest rate of 12 percent, an ordinary annuity of eight annual $30,000 payments will grow to

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - If Cheng Corporation can invest $10,000 at 10 percent interest compounded annually, approximately how many years will it take for the $10,000 to grow to $20,000?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -he present value of an annuity of $500 for 10 years at 10 percent interest compounded annually is

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Which of the following has the smallest present value?