Question 1

You have discovered an investment opportunity that earns a 6% rate of interest compounded semiannually.What amount should you deposit today to have $5,000 in three years?

Accepted Answer

We can use the formula A=P(1+r/n)^(nt), where A is the future value, P is the present value, r is the annual interest rate, n is the number of times compounded per year, and t is the number of years. Plugging in the given values, we get:
5000 = P(1+0.06/2)^(2*3)
Solving for P, we get P = $4,187. Therefore, the best choice is C.

Question 2

A specific future value of an ordinary annuity factor for a given number of periods and a specific discount rate is equal to the cumulative sum of the future value of a single sum factors over the number of periods for that discount rate.

Accepted Answer

This statement is true according to the formula for calculating the future value of an ordinary annuity, which involves multiplying the periodic payment by the future value of an ordinary annuity factor. The formula for calculating the future value of a single sum involves multiplying the present value by the future value of a single sum factor. The cumulative sum of the future value of a single sum factors over the number of periods for a specific discount rate is equal to the future value of a single sum, which can be used to calculate the future value of an ordinary annuity.

Question 3

An annuity due is a series of equal periodic payments made at the beginning of each period.

Accepted Answer

Annuity due payments are made at the beginning of each period, while ordinary annuity payments are made at the end of each period.

Question 4

You have discovered an investment opportunity that earns a 9% rate of interest compounded annually.What amount should you deposit today to have $3,000 in two years?

Accepted Answer

The answer of You have discovered an investment opportunity that...

Question 5

Henry Rector deposited $5,000 in a certificate of deposit that provides interest of 10% compounded quarterly if the amount is maintained for 5 years.How much will Henry have at the end of 5 years?

Accepted Answer

The answer of Henry Rector deposited $5,000 in a certificate...

Question 6

A zero-interest bond pays $600,000 in 10 years.What amount would you be willing to pay to acquire the bond today if you want to earn a return of approximately 8%?

Accepted Answer

The present value of the bond can be calculated using the formula:PV = FV / (1 + r)^nwhere:PV is the present valueFV is the future valuer is the annual interest raten is the number of yearsIn this case, the future value is $600,000, the annual interest rate is 8%, and the number of years is 10. Plugging these values into the formula, we get:PV = 600,000 / (1 + 0.08)^10PV = $277,900Therefore, the amount you would be willing to pay to acquire the bond today is $277,900.

Question 7

Maria Gonzales is considering two investment options for a $2,500 gift she received for graduation.Both investments have the same annual interest rates but one offers quarterly compounding while the other compounds on a monthly basis.Which investment should she choose? Why?

Accepted Answer

The answer of Maria Gonzales is considering two investment options...

Question 8

For any discount rate,the future value of an annuity due factor for n periods is equal to the future value of an ordinary annuity factor for n + 1 periods minus 1.

Accepted Answer

This is a well-known formula in finance for calculating the future value of an annuity due, where the future value is equal to the sum of payments plus interest earned over a certain period of time. By adding an extra period and subtracting 1 from the future value of an ordinary annuity factor, we can derive the future value of an annuity due factor.

Question 9

Fanagi Corp.borrowed $58,000 from its bank at a 6% annual interest rate and will repay $250,000.Assume annual compounding.In approximately how many years will Fanagi repay the loan?

Accepted Answer

The answer of Fanagi Corp.borrowed $58,000 from its bank at...

Question 10

Paula Poser will receive $80,000 on December 31,2022,from a trust fund established by her mother.Assuming the appropriate interest rate for discounting is 12% (compounded semiannually),what is the present value of this amount as of January 1,2017 (5 years earlier)?

Accepted Answer

The answer of Paula Poser will receive $80,000 on December...

Question 11

An ordinary annuity is a series of equal periodic payments and an annuity due is a series of unequal periodic payments.

Accepted Answer

An ordinary annuity is a series of equal periodic payments and an annuity due is a series of equal periodic payments, but with the first payment made at the beginning of the period instead of the end like in an ordinary annuity.

Question 12

Punjab Company borrowed $114,000 from its bank.Punjab will repay $150,000 in 7 years.What is the approximate interest rate that Punjab will incur on this loan,assuming annual compounding?

Accepted Answer

The answer of Punjab Company borrowed $114,000 from its bank.Punjab...

Question 13

You are provided with two time-value-of-money tables.One is a present value table and one is a future value table.How can you tell which table is which type?

Accepted Answer

The answer of You are provided with two time-value-of-money tables.One...

Question 14

With an annuity due,a payment is made or received on the date the agreement begins.

Accepted Answer

An annuity due is a type of financial contract in which a payment is made or received at the beginning of the period, rather than at the end. This is in contrast to a regular annuity, in which payments are made or received at the end of the period. So, in the case of an annuity due, the payment is made or received on the date the agreement begins.

Question 15

List the variables in a single-sum problem.

Accepted Answer

The answer of List the variables in a single-sum problem....

Question 16

For any discount rate,the future value of an annuity due factor for n periods is equal to the future value of an ordinary annuity factor for n - 1 periods plus 1.

Accepted Answer

The answer of For any discount rate,the future value of...

Question 17

Como Company borrowed $4,550 from its bank.Como will repay $7,000 in five years.What is the approximate interest rate that Como will incur on this loan,assuming annual compounding?

Accepted Answer

The correct answer is A because the interest rate is approximately 9%. The formula for calculating the interest rate is: I = (FV - PV) / PV * n, where I is the interest rate, FV is the future value, PV is the present value, and n is the number of years. In this case, the future value is $7,000, the present value is $4,550, and the number of years is 5. Plugging these values into the formula, we get: I = (7000 - 4550) / 4550 * 5 = 0.09, or 9%.

Question 18

You have discovered an investment opportunity that earns a 8% rate of interest compounded quarterly.Which of the following amounts is most nearly equal to the amount you should deposit today to have $7,000 in five years?

Accepted Answer

The answer of You have discovered an investment opportunity that...

Question 19

A zero-interest bond pays $200,000 in seven years.What amount would you be willing to pay to acquire the bond today if you want to earn a return of approximately 10%?

Accepted Answer

To earn a return of approximately 10%, the present value of the bond must be discounted at a 10% rate:
PV = $200,000 / (1 + 0.10)^7 = $102,604. Therefore, the amount to be paid to acquire the bond today would be approximately $102,600 (rounded off to the nearest hundred dollars). None of the other answer choices match this value.

Question 20

An ordinary annuity is a series of equal periodic payments made at the beginning of each period.

Accepted Answer

An ordinary annuity is a series of equal periodic payments made at the end of each period.

Quiz 7: Accounting and the Time Value of Money

You have discovered an investment opportunity that earns a 6% rate of interest compounded semiannually.What amount should you deposit today to have $5,000 in three years?

A specific future value of an ordinary annuity factor for a given number of periods and a specific discount rate is equal to the cumulative sum of the future value of a single sum factors over the number of periods for that discount rate.

An annuity due is a series of equal periodic payments made at the beginning of each period.

You have discovered an investment opportunity that earns a 9% rate of interest compounded annually.What amount should you deposit today to have $3,000 in two years?

Henry Rector deposited $5,000 in a certificate of deposit that provides interest of 10% compounded quarterly if the amount is maintained for 5 years.How much will Henry have at the end of 5 years?

A zero-interest bond pays $600,000 in 10 years.What amount would you be willing to pay to acquire the bond today if you want to earn a return of approximately 8%?

Maria Gonzales is considering two investment options for a $2,500 gift she received for graduation.Both investments have the same annual interest rates but one offers quarterly compounding while the other compounds on a monthly basis.Which investment should she choose? Why?

For any discount rate,the future value of an annuity due factor for n periods is equal to the future value of an ordinary annuity factor for n + 1 periods minus 1.

Fanagi Corp.borrowed $58,000 from its bank at a 6% annual interest rate and will repay $250,000.Assume annual compounding.In approximately how many years will Fanagi repay the loan?

Paula Poser will receive $80,000 on December 31,2022,from a trust fund established by her mother.Assuming the appropriate interest rate for discounting is 12% (compounded semiannually),what is the present value of this amount as of January 1,2017 (5 years earlier)?

An ordinary annuity is a series of equal periodic payments and an annuity due is a series of unequal periodic payments.

Punjab Company borrowed $114,000 from its bank.Punjab will repay $150,000 in 7 years.What is the approximate interest rate that Punjab will incur on this loan,assuming annual compounding?

You are provided with two time-value-of-money tables.One is a present value table and one is a future value table.How can you tell which table is which type?

With an annuity due,a payment is made or received on the date the agreement begins.

List the variables in a single-sum problem.

For any discount rate,the future value of an annuity due factor for n periods is equal to the future value of an ordinary annuity factor for n - 1 periods plus 1.

Como Company borrowed $4,550 from its bank.Como will repay $7,000 in five years.What is the approximate interest rate that Como will incur on this loan,assuming annual compounding?

You have discovered an investment opportunity that earns a 8% rate of interest compounded quarterly.Which of the following amounts is most nearly equal to the amount you should deposit today to have $7,000 in five years?

A zero-interest bond pays $200,000 in seven years.What amount would you be willing to pay to acquire the bond today if you want to earn a return of approximately 10%?

An ordinary annuity is a series of equal periodic payments made at the beginning of each period.