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HW-1186 Online Exam-3
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Online Exam 3_03
Part 1 of 1 -
Question 1 of 20
Your company just sold a product with the following payment plan: $50,000 today, $25,000 next year, and $10,000 the following year. If your firm places the payments into an account earning 10% per year, how much money will be in the account after collecting the last payment?
A. $99,000
B. $98,000
C. $88,500
D. $85,000
Question 2 of 20
Your trust fund will pay you $100,000 in six years when you turn 25. A shady financial institution has encouraged you to sign away the rights to your trust fund in exchange for cash today. Would you prefer that the financial institution use a discount rate of 8% or 10% to determine the value of your lump sum payment? Why?
A. Use 8% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.
B. Use 10% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.
C. Use 8% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.
D. Use 10% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.
Question 3 of 20
Which of the following will result in a future value greater than $100?
A. PV = $50, r = an annual interest rate of 10%, and n = 8 years.
B. PV = $75, r = an annual interest rate of 12%, and n = 3 years.
C. PV = $90, r = an annual interest rate of 14%, and n = 1 year.
D. All of the future values are greater than $100.
Question 4 of 20
Johnson has an annuity due that pays $600 per year for 15 years. What is the present value of the cash flows if they are discounted at an annual rate of 7.50%?
A. $5,296.27
B. $5,693.49
C. $9,000.00
D. $9,675.00
Question 5 of 20
To determine the present value of a future amount, one should _________ the future cash flows.
A. annuitize
B. compound
C. discount
D. multiply
Question 6 of 20
Which of the following formulas is correct for finding the present value of an investment?
A. FV =
B. PV = FV × (1 + r)n
C. PV = FVn × (1 + r)
D. PV = FV ×
Question 7 of 20
Twelve years ago, you paid for the right to twelve $25,000 annual end-of-the-year cash flows. If discounting the cash flows at an annual rate of 8%, what did you pay for these cash flows back then?
A. $474,428.16
B. $300,000.00
C. $203,474.11
D. $188,401.95
Question 8 of 20
A never-ending stream of equal periodic, end-of-the-period cash flows is called a/an__________.
A. annuity
B. annuity due
C. perpetuity
D. amortization
Question 9 of 20
Which of the following is the correct formula for calculating the future value?
A. FV =
B. FV = PV × (1 + r)n
C. PV = FV × (1 + r)n
D. PV =
Question 10 of 20
Your aunt places $13,000 into an account earning an interest rate of 7% per year. After five years the account will be valued at $18,233.17. Which of the following statements is correct?
A. The present value is $13,000, the time period is seven years, the present value is $18,233.17, and the interest rate is 5%.
B. The future value is $13,000, the time period is five years, the principal is $18,233.17, and the interest rate is 7%.
C. The principal is $13,000, the time period is five years, the future value is $18,233.17, and the interest rate is 7%.
D. The principal is $13,000, the time period is seven years, the future value is $18,233.17, and the interest rate is 5%.
Question 11 of 20
You have purchased a Treasury bond that will pay $10,000 to your newborn child in 15 years. If this bond is discounted at a rate of 3.875% per year, what is today's price (present value. for this bond?
A. $8,417
B. $8,500
C. $5,654
D. $10,000
Question 12 of 20
Your university is running a special offer on tuition. This year's tuition cost is $18,000. Next year's tuition cost is scheduled to be $19,080. The university offers to discount next year's tuition at a rate of 6% if you agree to pay both years' tuition in full today. How much is the total tuition bill today if you take the offer?
A. $18,000
B. $34,981
C. $37,080
D. $36,000
Question 13 of 20
What is the present value today of an ordinary annuity cash flow of $3,000 per year for 40 years at an interest rate of 6.0% per year?
A. $120,000.00
B. $1,327,777.67
C. $45,139.89
D. $32,270.87
Question 14 of 20
Which of the following actions will DECREASE the present value of an investment?
A. decrease the interest rate
B. decrease the future value
C. decrease the amount of time
D. All of the above will decrease the present value.
Question 15 of 20
An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?
A. The interest earned in year one is $8.32 and the interest earned in year two is $8.32.
B. The interest earned in year one is $8.00 and the interest earned in year two is $8.64.
C. The interest earned in year one is $8.64 and the interest earned in year two is $8.00.
D. There is not enough information to solve this problem.
Question 16 of 20
A furniture store has a sofa on sale for $399.00, with the payment due one year from today. The store is willing to discount the price at an annual rate of 5% if you pay today. What is the amount if you pay today?
A. $380
B. $399
C. $419
D. $394
Question 17 of 20
A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?
A. The PV is $178.00.
B. The FV is $224.00.
C. The FV is $224.72.
D. This question is irrelevant because there are no two-year investments that earn an average of 6% per year.
Question 18 of 20
Your grandparents leave on their dream vacation to Antarctica in two years. The cruise vacation will cost them $25,000. If they have already saved $23,500 and are investing it at a rate of 2.75% per year, will they have saved enough money for their trip?
A. No, because they forgot to factor in long underwear expenses.
B. Yes, to have enough money they would have already needed to save $23,375.
C. Yes, to have enough money they would have already needed to save $23,680.
D. No, to have enough money they would have already needed to save $23,680.
Question 19 of 20
The one-time payment of money at a future date is often called a__________.
A. lump-sum payment
B. present value
C. principal amount
D. perpetuity payment
Question 20 of 20
A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?
A. The future value would be greater if the interest rate was higher.
B. The present value would be greater if the interest rate was higher.
C. The future value would be greater if the interest rate was lower.
D. The future value does not change as the interest rate change
Answer will be sent by email as attachment.
Part 1 of 1 -
Question 1 of 20
Your company just sold a product with the following payment plan: $50,000 today, $25,000 next year, and $10,000 the following year. If your firm places the payments into an account earning 10% per year, how much money will be in the account after collecting the last payment?
A. $99,000
B. $98,000
C. $88,500
D. $85,000
Question 2 of 20
Your trust fund will pay you $100,000 in six years when you turn 25. A shady financial institution has encouraged you to sign away the rights to your trust fund in exchange for cash today. Would you prefer that the financial institution use a discount rate of 8% or 10% to determine the value of your lump sum payment? Why?
A. Use 8% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.
B. Use 10% because the lump sum payment of $62,741 is greater than the 10% discounted value of $55,839.
C. Use 8% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.
D. Use 10% because the lump sum payment of $63,017 is greater than the 10% discounted value of $56,447.
Question 3 of 20
Which of the following will result in a future value greater than $100?
A. PV = $50, r = an annual interest rate of 10%, and n = 8 years.
B. PV = $75, r = an annual interest rate of 12%, and n = 3 years.
C. PV = $90, r = an annual interest rate of 14%, and n = 1 year.
D. All of the future values are greater than $100.
Question 4 of 20
Johnson has an annuity due that pays $600 per year for 15 years. What is the present value of the cash flows if they are discounted at an annual rate of 7.50%?
A. $5,296.27
B. $5,693.49
C. $9,000.00
D. $9,675.00
Question 5 of 20
To determine the present value of a future amount, one should _________ the future cash flows.
A. annuitize
B. compound
C. discount
D. multiply
Question 6 of 20
Which of the following formulas is correct for finding the present value of an investment?
A. FV =
B. PV = FV × (1 + r)n
C. PV = FVn × (1 + r)
D. PV = FV ×
Question 7 of 20
Twelve years ago, you paid for the right to twelve $25,000 annual end-of-the-year cash flows. If discounting the cash flows at an annual rate of 8%, what did you pay for these cash flows back then?
A. $474,428.16
B. $300,000.00
C. $203,474.11
D. $188,401.95
Question 8 of 20
A never-ending stream of equal periodic, end-of-the-period cash flows is called a/an__________.
A. annuity
B. annuity due
C. perpetuity
D. amortization
Question 9 of 20
Which of the following is the correct formula for calculating the future value?
A. FV =
B. FV = PV × (1 + r)n
C. PV = FV × (1 + r)n
D. PV =
Question 10 of 20
Your aunt places $13,000 into an account earning an interest rate of 7% per year. After five years the account will be valued at $18,233.17. Which of the following statements is correct?
A. The present value is $13,000, the time period is seven years, the present value is $18,233.17, and the interest rate is 5%.
B. The future value is $13,000, the time period is five years, the principal is $18,233.17, and the interest rate is 7%.
C. The principal is $13,000, the time period is five years, the future value is $18,233.17, and the interest rate is 7%.
D. The principal is $13,000, the time period is seven years, the future value is $18,233.17, and the interest rate is 5%.
Question 11 of 20
You have purchased a Treasury bond that will pay $10,000 to your newborn child in 15 years. If this bond is discounted at a rate of 3.875% per year, what is today's price (present value. for this bond?
A. $8,417
B. $8,500
C. $5,654
D. $10,000
Question 12 of 20
Your university is running a special offer on tuition. This year's tuition cost is $18,000. Next year's tuition cost is scheduled to be $19,080. The university offers to discount next year's tuition at a rate of 6% if you agree to pay both years' tuition in full today. How much is the total tuition bill today if you take the offer?
A. $18,000
B. $34,981
C. $37,080
D. $36,000
Question 13 of 20
What is the present value today of an ordinary annuity cash flow of $3,000 per year for 40 years at an interest rate of 6.0% per year?
A. $120,000.00
B. $1,327,777.67
C. $45,139.89
D. $32,270.87
Question 14 of 20
Which of the following actions will DECREASE the present value of an investment?
A. decrease the interest rate
B. decrease the future value
C. decrease the amount of time
D. All of the above will decrease the present value.
Question 15 of 20
An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?
A. The interest earned in year one is $8.32 and the interest earned in year two is $8.32.
B. The interest earned in year one is $8.00 and the interest earned in year two is $8.64.
C. The interest earned in year one is $8.64 and the interest earned in year two is $8.00.
D. There is not enough information to solve this problem.
Question 16 of 20
A furniture store has a sofa on sale for $399.00, with the payment due one year from today. The store is willing to discount the price at an annual rate of 5% if you pay today. What is the amount if you pay today?
A. $380
B. $399
C. $419
D. $394
Question 17 of 20
A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?
A. The PV is $178.00.
B. The FV is $224.00.
C. The FV is $224.72.
D. This question is irrelevant because there are no two-year investments that earn an average of 6% per year.
Question 18 of 20
Your grandparents leave on their dream vacation to Antarctica in two years. The cruise vacation will cost them $25,000. If they have already saved $23,500 and are investing it at a rate of 2.75% per year, will they have saved enough money for their trip?
A. No, because they forgot to factor in long underwear expenses.
B. Yes, to have enough money they would have already needed to save $23,375.
C. Yes, to have enough money they would have already needed to save $23,680.
D. No, to have enough money they would have already needed to save $23,680.
Question 19 of 20
The one-time payment of money at a future date is often called a__________.
A. lump-sum payment
B. present value
C. principal amount
D. perpetuity payment
Question 20 of 20
A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?
A. The future value would be greater if the interest rate was higher.
B. The present value would be greater if the interest rate was higher.
C. The future value would be greater if the interest rate was lower.
D. The future value does not change as the interest rate change
Answer will be sent by email as attachment.
