Question 1

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to double again if it earns 14 percent per year?

Accepted Answer

A)   4.92 years
B)   5.29 years
C)   6.62 years
D)   8.22 yearsE) A) and D)
F) All of the above

Question 2

Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

Accepted Answer

A)   0.06 year
B)   6 years
C)   6.94 years
D)   18 yearsE) A) and B)
F) A) and C)

Question 3

What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years "6 through 13" and increase to 18 percent in the remaining years?

Accepted Answer

A)   $5,779.57
B)   $5,912.42
C)   $6,005.71
D)   $6,407.13E) B) and C)
F) A) and D)

Question 4

If an average home in your town currently costs $250,000,and house prices are expected to grow at an average rate of 3 percent per year,what will a house cost in eight years?

Accepted Answer

A)   $255,033.41
B)   $255,043.97
C)   $314,928.01
D)   $316,692.52E) B) and C)
F) A) and B)

Question 5

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

Accepted Answer

A)   $498.61
B)   $525.87
C)   $555.56
D)   $575.09E) A) and B)
F) A) and C)

Question 6

Ten years ago,Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now) .James can make a 20-year investment today and lock in a 6 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Accepted Answer

A)   $673.75
B)   $1,206.59
C)   $1,967.15
D)   $2,373.54E) A) and B)
F) A) and C)

Question 7

What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year 6?

Accepted Answer

A)   6.99 percent
B)   14.47 percent
C)   24.00 percent
D)   50.00 percentE) A) and D)
F) A) and C)

Question 8

A $400 investment has doubled to $800 in six years because of a 12.25 percent return.How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

Accepted Answer

A)   2.56 years
B)   2.76 years
C)   3.46 years
D)   5 yearsE) A) and B)
F) A) and C)

Question 9

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year.

Accepted Answer

A)   0.89 percent
B)   1.12 percent
C)   12.00 percent
D)   89.00 percentE) A) and C)
F) C) and D)

Question 10

A $7 million deposit earns 5 percent for nine years.If the account loses 2 percent per year after that,how long will it take to be reduced back to $7 million?

Accepted Answer

A)   6.78 years
B)   10.29 years
C)   11.29 years
D)   21.74 yearsE) B) and C)
F) A) and D)

Question 11

Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.

Accepted Answer

A)   100 percent
B)   10 percent
C)   1 percent
D)   15 percentE) C) and D)
F) None of the above

Question 12

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

Accepted Answer

A)   0.77 percent
B)   1.30 percent
C)   30.0 percent
D)   77.0 percentE) C) and D)
F) B) and C)

Question 13

How are present values affected by changes in interest rates?

Accepted Answer

A)   The lower the interest rate, the larger the present value will be.
B)   The higher the interest rate, the larger the present value will be.
C)   Present values are not affected by changes in interest rates.
D)   One would need to know the future value in order to determine the impact.E) A) and B)
F) None of the above

Question 14

Consider a $2,000 deposit earning 6 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest) ?

Accepted Answer

A)   $60.00
B)   $76.45
C)   $600.00
D)   $676.45E) B) and C)
F) All of the above

Question 15

At age 20 you invest $1,000 that earns 7 percent each year.At age 30 you invest $1,000 that earns 10 percent per year.In which case would you have more money at age 60?

Accepted Answer

A)   At age 20 invest $1,000 at 7 percent.
B)   At age 30 invest $1,000 at 10 percent.
C)   Both yield the same amount at age 60.
D)   There is not enough information to determine which case earns the most money at age 60.E) A) and B)
F) All of the above

Question 16

What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

Accepted Answer

A)   $478.11
B)   $980.00
C)   $1,024.87
D)   $1,364.10E) C) and D)
F) B) and D)

Question 17

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually?

Accepted Answer

A)   $792.90
B)   $803.61
C)   $899.23
D)   $910.84E) None of the above
F) B) and D)

Question 18

You want to retire in 25 years and you have just inherited $300,000.You believe you will need $1,450,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

Accepted Answer

A)   4.5 percent
B)   5.5 percent
C)   6.5 percent
D)   8.5 percentE) C) and D)
F) B) and C)

Question 19

Time value of money concepts can be used by

Accepted Answer

A)   individuals doing personal financial planning.
B)   CFOs and CEOs to make business decisions.
C)   investors calculating a return on an investment.
D)   All of these choices are correct.E) C) and D)
F) All of the above

Question 20

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?

Accepted Answer

A)   $771.07
B)   $819.00
C)   $823.90
D)   $1519.00E) C) and D)
F) None of the above

Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

You want to retire in 25 years and you have just inherited $300,000.You believe you will need $1,450,000 upon retirement.What rate will you need to earn on the account to achieve this goal?

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What is the value in year 7 of a $700 cash flow made in year 3 when the interest rates are 10 percent?

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A $7 million deposit earns 5 percent for nine years.If the account loses 2 percent per year after that,how long will it take to be reduced back to $7 million?

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If an average home in your town currently costs $250,000,and house prices are expected to grow at an average rate of 3 percent per year,what will a house cost in eight years?

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At age 20 you invest $1,000 that earns 7 percent each year.At age 30 you invest $1,000 that earns 10 percent per year.In which case would you have more money at age 60?

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What is the value in year 20 of a $1,000 cash flow made in year 8 if interest rates are 15 percent in years "6 through 13" and increase to 18 percent in the remaining years?

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What is the future value of $600 deposited for four years earning an 11 percent interest rate annually?

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A $400 investment has doubled to $800 in six years because of a 12.25 percent return.How much longer will it take for the investment to reach $1100 if it continues to earn 12.25 percent?

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Time value of money concepts can be used by

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Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year.

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Approximately how many years does it take to double a $500 investment when interest rates are 4 percent per year?

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A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year.What would be the second year future value?

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What is the present value of a $600 payment in one year when the discount rate is 8 percent?

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Determine the interest rate earned on an $800 deposit when $808 is paid back in one year.

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Consider a $2,000 deposit earning 6 percent interest per year for five years.How much total interest is earned on the original deposit (excluding interest earned on interest) ?

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How are present values affected by changes in interest rates?

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Ten years ago,Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now) .James can make a 20-year investment today and lock in a 6 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

Correct AnswerverifiedShow Answer

You deposit $20,000 in an account that doubles in seven years.How many years will it take the account to double again if it earns 14 percent per year?

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What annual rate of return is earned on a $2,000 investment made in year 3 when it grows to $3,000 by the end of year 6?

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Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

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