Question 1

An _____________ is a series of equal payments occurring at equal intervals.

Accepted Answer

The answer of An _____________ is a series of equal...

Question 2

A company borrows money from the bank by promising to make 6 annual year-end payments of
$25,000 each.How much is the company able to borrow if the interest rate is 9%?

Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
Present Value of an Annuity = $25,000 * 4.4859 = $112,147.50
4.4859 is the interest factor on the Present Value of an Annuity table; n = 6; i = 9%

Question 3

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The
fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts
for 7 years.What is the amount of the annual deposits that the company must make?

Accepted Answer

Future Value of an Annuity = Annuity * Interest Factor
$8,654,000 = Annuity * 8.654; Annuity = $1,000,000
8.654 is the interest factor on the Future Value of an Annuity table; n = 7; i = 7%
Fill-in-the-Blank Questions

Question 4

You are little late planning your retirement,but are looking forward to retiring in 10 years.You
expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you
retire?

Accepted Answer

Future Value of an Annuity = Annuity * Interest Factor
Future Value of an Annuity = $6,000 * 14.487 = $86,922
14.487 is the interest factor on the Future Value of an Annuity table; n = 10; i = 8%

Question 5

A company is setting aside $21,354 today,and wishes to have $30,000 at the end of three years for
a down payment on a piece of property.What interest rate must the company earn?

Accepted Answer

Present Value = Future Value * Interest Factor
$21,354 = $30,000 * Interest Factor; Interest Factor = 0.7118
0.7118 is the interest factor on the Present Value table; n = 3; i = 12%
Or, Alternative Solution: Future Value = Present Value * Interest Factor
$30,000 = $21,354 * Interest Factor; Interest Factor = 1.4049
1.3605 is the interest factor on the Future Value table; n = 3; i = 12%

Question 6

A company is creating a fund today by depositing $65,763.The fund will grow to $90,000 after 8 years.What annual interest rate is the company earning on the fund?

Accepted Answer

Present Value = Future Value * Interest Factor
$65,763 = $90,000 * Interest Factor; Interest Factor = 0.7307
0.7307 is the interest factor on the Present Value table; n = 8; i = 4%
Or, Alternative Solution: Future Value = Present Value * Interest Factor
$90,000 = $65,763 * Interest Factor; Interest Factor = 1.3686
1.3686 is the interest factor on the Future Value table; n = 8; i = 4%

Question 7

Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on
the loan is 5%,compounded annually.How much did Annette borrow today?

Accepted Answer

Present Value = Future Value * Interest Factor
Present Value = $25,000 * 0.8638 = $21,595
0.8638 is the interest factor on the Present Value table; n = 3; i = 5%

Question 8

When you reach retirement age,you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?

Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
$100,000 = $14,702 * Interest Factor; Interest Factor = 6.8017
6.8017 is the interest factor on the Present Value of an Annuity table; i = 6%; n = 9

Question 9

The interest rate is also called the __________________ rate.

Accepted Answer

The answer of The interest rate is also called the...

Question 10

_____________ is a borrower's payment to the owner of an asset for its use.

Accepted Answer

The answer of _____________ is a borrower's payment to the...

Question 11

A company is beginning a savings plan.It will be saving $15,000 per year for the next 10 years.
How much will the company have accumulated after the tenth year-end deposit,assuming the fund
earns 10% interest?

Accepted Answer

Future Value of an Annuity = Annuity * Interest Factor
Future Value of an Annuity = $15,000 * 15.937 = $239,055
15.937 is the interest factor on the Future Value of an Annuity table; n = 10; i = 10%

Question 12

Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of 5 years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the 5 years?

Accepted Answer

Future Value = Present Value * Interest Factor
Future Value = $105,000 * 1.6289 = $171,034.50
1.6289 is the interest factor on the Future Value table; n =5 * 2 = 10; i = 10/2 = 5%
Goal of $175,000 - Future Value of $172,034.50 = Shortage of $3,965.50

Question 13

Madera Iron Sculpting is planning on replacing one of its robotic welders in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1.The deposits will earn 10% interest.How much money will Sierra have accumulated at the end of five years to replace the welder?

Accepted Answer

Future Value = Present Value * Interest Factor
Future Value = $20,000 * 1.6105 = $32,210
1.6105 is the interest factor on the Future Value table; n = 5; i = 10%
Future Value of an Annuity = Annuity * Interest Factor
Future Value of an Annuity = $5,000 * 4.6410 = $23,205
4.6410 is the interest factor on the Future Value of an Annuity table; n = 4; i = 10%
Accumulated Funds = $32,210 + $23,205 = $55,415

Question 14

To calculate present value of an amount,two factors are required:
 __________________ and
___________________.

Accepted Answer

The answer of To calculate present value of an amount,two...

Question 15

The future value of an ________________ annuity is the accumulated value of each annuity
payment with interest as of the date of the final payment.

Accepted Answer

The answer of The future value of an ________________ annuity...

Question 16

Thompson Company has acquired a machine from a dealer that requires a payment of $45,000 at
the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the
value of the machine today?

Accepted Answer

Present Value = Future Value * Interest Factor
Present Value = $45,000 * 0.6756 = $30,402
0.6756 is the interest factor on the Present Value table; n = 5*2=10; i = 8%/2= 4%

Question 17

Daley Co.lends $524,210 to Davis Corporation.The terms of the loan require that Davis make six
semiannual period-end payments of $100,000 each.What semiannual interest rate is Davis paying on
the loan?

Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
$524,210 = $100,000 * Interest Factor; Interest Factor = 5.2421
5.2421 is the interest factor on the Present Value of an Annuity table; n = 6; i = 4%
Davis is paying a 4% semi-annual rate or an 8% annual rate of interest

Question 18

A company has $50,000 today to invest in a fund that will earn 7%.How much will the fund
contain at the end of 8 years?

Accepted Answer

Future Value = Present Value * Interest Factor
Future Value = $50,000 *1.7182 = $85,910
1.7182 is the interest factor on the Future Value table; n = 8; i = 7%

Question 19

Big League Sports borrowed $883,212,and must make annual year-end payments of $120,000
each.If Big League's interest rate is 6%,how many years will it take Big League Sports to pay off the
loan?

Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
$883,212 = $120,000 * Interest Factor; Interest Factor = 7.3601
7.3601 is the interest factor on the Present Value of an Annuity table; i = 6%; n =10

Question 20

A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each.How much is the company able to borrow if the interest rate is 10% compounded semiannually?

Accepted Answer

Present Value of an Annuity = Annuity * Interest Factor
Present Value of an Annuity = $9,000 * 6.4632 = $58,168.80
6.4632 is the interest factor on the Present Value of an Annuity table; n = 8; i = 10%/2 = 5%

Quiz 26: Time Value of Money B

An _____________ is a series of equal payments occurring at equal intervals.

A company borrows money from the bank by promising to make 6 annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for 7 years.What is the amount of the annual deposits that the company must make?

You are little late planning your retirement,but are looking forward to retiring in 10 years.You expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you retire?

A company is setting aside $21,354 today,and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?

A company is creating a fund today by depositing $65,763.The fund will grow to $90,000 after 8 years.What annual interest rate is the company earning on the fund?

Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on the loan is 5%,compounded annually.How much did Annette borrow today?

When you reach retirement age,you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?

The interest rate is also called the __________________ rate.

_____________ is a borrower's payment to the owner of an asset for its use.

A company is beginning a savings plan.It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit,assuming the fund earns 10% interest?

Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of 5 years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the 5 years?

To calculate present value of an amount,two factors are required: and _.

The future value of an ________________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

Thompson Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?

Daley Co.lends $524,210 to Davis Corporation.The terms of the loan require that Davis make six semiannual period-end payments of $100,000 each.What semiannual interest rate is Davis paying on the loan?

A company has $50,000 today to invest in a fund that will earn 7%.How much will the fund contain at the end of 8 years?

Big League Sports borrowed $883,212,and must make annual year-end payments of $120,000 each.If Big League's interest rate is 6%,how many years will it take Big League Sports to pay off the loan?

A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each.How much is the company able to borrow if the interest rate is 10% compounded semiannually?

Quiz 26: Time Value of Money B

An _____________ is a series of equal payments occurring at equal intervals.

A company borrows money from the bank by promising to make 6 annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for 7 years.What is the amount of the annual deposits that the company must make?

You are little late planning your retirement,but are looking forward to retiring in 10 years.You expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you retire?

A company is setting aside $21,354 today,and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?

A company is creating a fund today by depositing $65,763.The fund will grow to $90,000 after 8 years.What annual interest rate is the company earning on the fund?

Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on the loan is 5%,compounded annually.How much did Annette borrow today?

When you reach retirement age,you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?

The interest rate is also called the __________________ rate.

_____________ is a borrower's payment to the owner of an asset for its use.

A company is beginning a savings plan.It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit,assuming the fund earns 10% interest?

Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of 5 years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the 5 years?

To calculate present value of an amount,two factors are required: __________________ and ___________________.

The future value of an ________________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

Thompson Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?

Daley Co.lends $524,210 to Davis Corporation.The terms of the loan require that Davis make six semiannual period-end payments of $100,000 each.What semiannual interest rate is Davis paying on the loan?

A company has $50,000 today to invest in a fund that will earn 7%.How much will the fund contain at the end of 8 years?

Big League Sports borrowed $883,212,and must make annual year-end payments of $120,000 each.If Big League's interest rate is 6%,how many years will it take Big League Sports to pay off the loan?

A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each.How much is the company able to borrow if the interest rate is 10% compounded semiannually?

To calculate present value of an amount,two factors are required: and _.