Question 1

Your friend offers to pay you an annuity of $2,500 at the end of each year for 3 years in return for cash today.You could earn 5.5% on your money in other investments with equal risk.What is the most you should pay for the annuity?
A) $5,493.71
B) $5,782.85
C) $6,087.21
D) $6,407.59
E) $6,744.83

Accepted Answer

N                      3
$\begin{array}{lr}
\text { I/YR } & 5.5 \% \
\text { PMT } & \$ 2,500 \
\text { FV } & \$ 0.00 \
\text { PV } & \$ 6,744.83
\end{array}$

Question 2

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
B) $2,967.92
C) $3,116.31
D) $3,272.13
E) $3,435.74

Accepted Answer

$\begin{array}{lr}
N & 10 \
\mathrm{I} / \mathrm{YR} & 4.25 \% \
\text { PMT } & \$ 0 \
\mathrm{FV} & \$ 4,500.00 \
\mathrm{PV} & \$ 2,967.92
\end{array}$

Question 3

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

Accepted Answer

$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 6.0 \% \
\mathrm{PV} & \$ 10,000.00 \
\mathrm{PMT} & \$ 0 \
\mathrm{FV} & \$ 30,000.00 \
\mathrm{~N} & 18.8
\end{array}$

Question 4

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%

Accepted Answer

N                     5
$\begin{array}{lr}
\text { PV } & \$ 1.50 \
\text { PMT } & \$ 0 \
\text { FV } & \$ 3.20 \% \
\text { I/YR } & 16.36
\end{array}$

Question 5

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

Accepted Answer

$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 3.8 \% \
\mathrm{PV} & \$ 5,000.00 \
\mathrm{PMT} & \$ 0 \
\mathrm{FV} & \$ 15,000.00 \
\mathrm{~N} & 29.46
\end{array}$

Question 6

What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%?
A) $16,576
B) $17,449
C) $18,367
D) $19,334
E) $20,352

Accepted Answer

N                  10
$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 5.5 \% \
\text { PMT } & \$ 2,700 \
\mathrm{FV} & \$ 0.00 \
\mathrm{PV} & \$ 20.352
\end{array}$

Question 7

You would like to travel in South America 5 years from now,and you can save $3,100 per year,beginning one year from today.You plan to deposit the funds in a mutual fund that you think will return 8.5% per year.Under these conditions,how much would you have just after you make the 5th deposit,5 years from now?
A) $18,369
B) $19,287
C) $20,251
D) $21,264
E) $22,327

Accepted Answer

N                      5
$\begin{array}{lr}
\text { I/YR } & 8.5 \% \
\text { PV } & \$ 0.00 \
\text { PMT } & \$ 3,100 \
\text { FV } & \$ 18,369
\end{array}$

Question 8

You are hoping to buy a new boat 3 years from now,and you plan to save $4,200 per year,beginning one year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the 3rd deposit,3 years from now?
A) $11,973
B) $12,603
C) $13,267
D) $13,930
E) $14,626

Accepted Answer

N                           3
$\begin{array}{lr}
\text { I/YR } & 5.2 \% \
\text { PV } & \$ 0.00 \
\text { PMT } & \$ 4,200 \
\text { FV } & \$ 13,266.56
\end{array}$

Question 9

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%

Accepted Answer

N                     5
$\begin{array}{lr}
\text { PV } & \$ 747.25 \
\text { PMT } & \$ 0 \
\text { FV } & \$ 1,000.00
\end{array}$
       I/YR              6.00%

Question 10

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

Accepted Answer

N                     5
$\begin{array}{lr}
\text { I/YR } & 4.25 \% \
\text { PMT } & \$ 0 \
\text { FV } & \$ 2,500.00 \
\text { PV } & \$ 2,030.30
\end{array}$

Question 11

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%

Accepted Answer

$$\begin{array} { l r } 
\text { N } & 10 \
\text { PV } &\$0.50 \
\text { PMT } &\$0 \
F V & \$2.20 \
I /Y R & 15.97\%
\end{array}$$

Question 12

You want to open a sushi bar 3 years from now,and you plan to save $7,000 per year,beginning immediately.You will make 3 deposits in an account that pays 5.2% interest.Under these assumptions,how much will you have 3 years from today?
A) $20,993
B) $22,098
C) $23,261
D) $24,424
E) $25,645

Accepted Answer

BEGIN Mode
       N                    3
$\begin{array}{lr}
\text { I/YR } & 5.2 \% \
\text { PV } & \$ 0.00 \
\text { PMT } & \$ 7,000 \
\text { FV } & \$ 23,261
\end{array}$
 
Alternative setup:
 $\begin{array}{cccc}
0 & 1 & 2 & 3 \
\hline \$ 7,000 & \$ 7,000 & \$ 7,000 & \$ 7,000 \
F V=\$ 23,261
\end{array}$

Question 13

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

Accepted Answer

$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 8.0 \% \
\mathrm{PV} & \$ 5,000.00 \
\text { PMT } & \$ 0 \
\mathrm{FV} & \$ 9,140.20 \
\mathrm{~N} & 7.84
\end{array}$

Question 14

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

Accepted Answer

$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 4.0 \% \
\mathrm{PV} & \$ 2,500.00 \
\mathrm{PMT} & \$ 0 \
\mathrm{FV} & \$ 5,000.00 \
\mathrm{~N} & 17.67
\end{array}$

Question 15

You want to purchase a motorcycle 4 years from now,and you plan to save $3,500 per year,beginning immediately.You will make 4 deposits in an account that pays 5.7% interest.Under these assumptions,how much will you have 4 years from today?
A) $16,112
B) $16,918
C) $17,763
D) $18,652
E) $19,584

Accepted Answer

BEGIN Mode
      N                      4
$\begin{array}{lr}
\mathrm{I} / \mathrm{YR} & 5.7 \% \
\mathrm{PV} & \$ 0.00 \
\text { PMT } & \$ 3,500 \
\mathrm{FV} & \$ 16,112
\end{array}$ 
Alternative setup:
 $\begin{array}{ccccc}
\mathrm{U} & 1 & 2 & 3 & 4 \
\hline \$ 3,500 & \$ 3,500 & \$ 3,500 & \$ 3,500 & \
&                                F V=\$ 16112
\end{array}$

Question 16

You want to buy new kitchen appliances 2 years from now,and you plan to save $8,200 per year,beginning one year from today.You will deposit your savings in an account that pays 6.2% interest.How much will you have just after you make the 2nd deposit,2 years from now?
A) $15,260
B) $16,063
C) $16,908
D) $17,754
E) $18,642

Accepted Answer

$\begin{array}{lr}
\mathrm{N} &2 \
\mathrm{I} / \mathrm{YR} & \$6 .2 \% \
\mathrm{PV} & \$ 0.00 \
\text { PMT } & \$ 8,200 \
\mathrm{FV} & \$ 16,908
\end{array}$

Question 17

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%

Accepted Answer

$$\begin{array} { l r } 
\text { N } & 10 \
\text { PV } & \$ 3,000.00 \
\text { PMT } &\$0 \
\text { FV } & \$ 5,000.00 \
\text { I/YR } & 5.28
\end{array}$$

Question 18

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
C) 11.47
D) 12.75
E) 14.02

Accepted Answer

$$\begin{array} { l r } 
\text { IVR } & 9.0 \% \
\text { PV } & \$ 3.50 \
\text { PMT } &\$0 \
V V & \$ 10.50 \
\mathrm {~N} & 12.75
\end{array}$$

Question 19

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

Accepted Answer

N                        25
$\begin{array}{lr}
\text { I/YR } &5.5\% \
\text { PMT } &\$0\
\text { FV } & \$ 5,000 \
\text { PV } & \$ 1,311.17
\end{array}$

Question 20

What is the PV of an ordinary annuity with 5 payments of $4,700 if the appropriate interest rate is 4.5%?
A) $16,806
B) $17,690
C) $18,621
D) $19,601
E) $20,633

Accepted Answer

N                   5
$\begin{array}{lr}
\text { I/YR } & 4.5 \% \
\text { PMT } & \$ 4,700 \
\text { FV } & \$ 0.00 \
\text { PV } & \$ 20,633
\end{array}$

Quiz 4: Time Value of Money

Your friend offers to pay you an annuity of $2,500 at the end of each year for 3 years in return for cash today.You could earn 5.5% on your money in other investments with equal risk.What is the most you should pay for the annuity?

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?

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?

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?

You have $5,000 invested in a bank that pays 3.8% annually.How long will it take for your funds to triple?

What is the PV of an ordinary annuity with 10 payments of $2,700 if the appropriate interest rate is 5.5%?

You are hoping to buy a new boat 3 years from now,and you plan to save $4,200 per year,beginning one year from today.You will deposit your savings in an account that pays 5.2% interest.How much will you have just after you make the 3rd deposit,3 years from now?

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?

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?

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?

You want to open a sushi bar 3 years from now,and you plan to save $7,000 per year,beginning immediately.You will make 3 deposits in an account that pays 5.2% interest.Under these assumptions,how much will you have 3 years from today?

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?

Your bank pays 4% interest annually.You have $2,500 invested in the bank.How long will it take for your funds to double?

You want to purchase a motorcycle 4 years from now,and you plan to save $3,500 per year,beginning immediately.You will make 4 deposits in an account that pays 5.7% interest.Under these assumptions,how much will you have 4 years from today?

You want to buy new kitchen appliances 2 years from now,and you plan to save $8,200 per year,beginning one year from today.You will deposit your savings in an account that pays 6.2% interest.How much will you have just after you make the 2nd deposit,2 years from now?

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?

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?

You expect to receive $5,000 in 25 years.How much is it worth today if the discount rate is 5.5%?

What is the PV of an ordinary annuity with 5 payments of $4,700 if the appropriate interest rate is 4.5%?