FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: The Time Value of Money

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Debby Robinson borrows $10,000 to be repaid over 10 years with equal annual payments at 9%.Repayment of principal in the second year is:

A) $1,558.20.
B) $1,000.00.
C) $717.44.
D) $658.20.

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

The concept of time value of money is not important to financial decision making because:

A) it emphasizes earning a return on invested capital.
B) it recognizes that earning a return makes $1 worth more today than $1 received in the future.
C) it can be applied to future cash flows in order to compare different streams of income.
D) it emphasizes the historic interest paid.

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

John Doeber borrowed $125,000 to buy a house.His loan cost was 11% and he promised to repay the loan over 15 years (amortization) .How much are the monthly payments with semiannual compounding?

Increasing the number of periods will increase all of the following except:

An annuity is a series of consecutive payments of equal amount.

Using semiannual compounding rather than annual compounding will increase the future value of an annuity.

In paying off a mortgage loan,the amount of the periodic payment that goes toward the reduction of principal increases over the life of the mortgage.

A home buyer signed a 20-year,8% mortgage for $72,500.How much should the annual loan payments be? (Assume annual compounding.)

The future value of an annuity assumes that the payments are received at the end of the year and that the last payment does not compound.

Babe Ruth Jr.has agreed to play for the Toronto Blue Jays for $9 million per year for the next 10 years.What table would you use to calculate the value of this contract in today's dollars?

Janice Hardin sets aside $5,000 each year for 10 years.She then withdraws the funds on an equal annual basis for the next 10 years.The two tables she should use in the correct order are:

A 20-year mortgage with monthly payments has a principal outstanding of $125,000.Interest is at 8% compounded semi-annually.What are the monthly payments?

The future value of a $1,000 investment today at 8% annual interest compounded semiannually for 5 years is:

The farther into the future any given amount is received,the larger its present value.

If we wish to accumulate $8,000 by the end of 4 years,how much should the annual payments be if we receive an interest rate of 10% on our investments? The first payment is made at the end of each year.

The higher the discount rate used in determining the future value of a $1 annuity,:

Mike Carlson will receive $10,000 a year from the end of the third year to the end of the 12^th year (10 payments) .The discount rate is 10%.The present value today of this deferred annuity is:

Marcia Stubern is planning for her golden years.She will retire in 20 years,at which time she plans to begin withdrawing $60,000 annually.She is expected to live for 20 years following her retirement.Her financial advisor thinks she can earn 9% annually.How much does she need to invest each year to prepare for her financial needs after her retirement?

The amount of annual payments necessary to accumulate a desired total can be found by reference to the present value of an annuity table.

You can lease a vehicle today for 36 months.The dealer will guarantee a residual value of $10,000.If the cash price of the car is $38,000,and the financing is priced at 8.75%,what would be your monthly payment?