Question 1

Match between columns
                        Premises: The amount that, if invested today at some compound interest rate for a specified period of time, will equal $1 at the end of that time period.
The amount that $1 becomes at a future date, if invested at a specified annual interest rate and compounded a certain number of times per year over the investment period.
Interest that is based on a principal amount that includes interest from previous time periods.
Interest borrowed only on the amount borrowed.
A series of equal payments made over equal time periods.
The amount of money that accumulates at some future date as a result of making equal payments over equal intervals of time and earning a specified rate of interest over that time period.
The process of adding interest to principal for purposes of interest calculation.
The amount of money that, if invested at some rate of interest today, will generate a set number of equal periodic payments that are made over equal time interval.

Accepted Answer

The Answer of Present value of an annuity and Simple is...

Question 2

On July 1,2010,a customer has agreed to make six,$2,000 quarterly cash payments
staring October 1,2010 and $6,000 on July 1,2013 in exchange for a piece of equipment
that cost you $12,000.If the annual interest rate is 8% and the how much profit did you
earn on the sale of the equipment?

Accepted Answer

The answer of On July 1,2010,a customer has agreed to...

Question 3

Match between columns
                        Premises: The chance of a decline in the purchasing power of the monetary unit during the time money is invested.
Exposure to the chance that an unfavorable outcome will occur at some future point in time.
The chance that an investment can not be quickly converted to cash.
A rate of return generated by an investment when there is virtually no chance that the return will not be generated.
An increase in the rate of return expected by an investor for assuming greater investment risk.
A summary measure of an investment's performance, stated as a percentage, based on the possible rates of return and on the likelihood of those rates of return occurring.
A measure of an investment's performance on a common size basis.
Return of the amount initially invested.
Money received in excess of an initial investment.
The risk that a business will not continue to operate.

Accepted Answer

The Answer of Inflation risk and Risk-free rate of return is...

Question 4

You are trying to decide whether to buy a machine today.The machine will generate
$12,000 cash at the end of each of the next 5 years.If you must have a 10% rate of
return on your investments,what is the most you would pay for this machine?

Accepted Answer

The answer of You are trying to decide whether to...

Question 5

Champion Contractors Corp is trying to decide which of two machines to buy.The price of the machines and their respective cash flows are described below.The decision to buy is based on which of the two machines produces the largest rate of return.Given the information below which of the machines should Champion buy?
Machine A: Cost $130,000 and will produce $36,063.27 each year for 5 years
Machine B: Cost $125,000 and will produce $16,188.07 every 6 months for 5 years (10 pmts).

Accepted Answer

The answer of Champion Contractors Corp is trying to decide...

Question 6

How much would you loan someone today,January 1,2010,if they promised to pay you
$10,000 on January 1,2012 and $20,000 on January 1,2015 and you want a 9 percent
return on your investment that is compounded annually?

Accepted Answer

The answer of How much would you loan someone today,January...

Question 7

Badger Corp is trying to decide whether to buy a new machine with a price of $40,000.Their analysis indicates the machine will generate annual cash flows of $11,000 for each of the next 6 years.The rate of return expected of any investment Badger make is 9%.Should Badger purchase the machine?

Accepted Answer

The answer of Badger Corp is trying to decide whether...

Question 8

If someone offered to give you a $500,000 noninterest-bearing note that was due 5 years from today (you will receive only one $500,000 payment three years from today)how much would you loan them if you wanted to earn an 6% annual interest rate that is compounded semiannually?

Accepted Answer

The answer of If someone offered to give you a...

Quiz 11: Time Value of Money

Match the following terms with the description below.

On July 1,2010,a customer has agreed to make six,$2,000 quarterly cash payments staring October 1,2010 and $6,000 on July 1,2013 in exchange for a piece of equipment that cost you $12,000.If the annual interest rate is 8% and the how much profit did you earn on the sale of the equipment?

Match the following terms with the descriptions below.

You are trying to decide whether to buy a machine today.The machine will generate $12,000 cash at the end of each of the next 5 years.If you must have a 10% rate of return on your investments,what is the most you would pay for this machine?

How much would you loan someone today,January 1,2010,if they promised to pay you $10,000 on January 1,2012 and $20,000 on January 1,2015 and you want a 9 percent return on your investment that is compounded annually?

Badger Corp is trying to decide whether to buy a new machine with a price of $40,000.Their analysis indicates the machine will generate annual cash flows of $11,000 for each of the next 6 years.The rate of return expected of any investment Badger make is 9%.Should Badger purchase the machine?

If someone offered to give you a $500,000 noninterest-bearing note that was due 5 years from today (you will receive only one $500,000 payment three years from today)how much would you loan them if you wanted to earn an 6% annual interest rate that is compounded semiannually?