Question 1 a) If we want to determine the present value of $500 to be paid in 5

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Question 1a)

If we want to determine the present value of $500 to be paid in 5 years and the interest rate over the time period is 12%, we need to multiply what times the $500?

Present Value Interest Factor of $1 for 5 years at 12%

None of the above

Present Value Interest Factor of an annuity for 5 years at 12%

Future Value Interest Factor of $1 for 5 years at 12%

1b)Which of the following statements about time lines is false?

A time line is a graphic portrayal of a time value problem.

Future time periods are to the right of zero.

Time is portrayed along a vertical line.

Time zero is the present point in time.

Question 1c)

What present amount is equivalent to $100 received at the end of each year for 8 years, given an opportunity cost of 20%

419.30

$432.20

383.72

$361.90

$407.80

Question 1d)

A four-year annuity of $1,000 annual payments at the end of each year, with a 10% interest rate is worth how much today?

$3,169.87

$3,486.85

$2,914.67

none of the above

Question 1e)

If you invest $10,000 in a 4-year certificate of deposit (CD) paying 10 percent interest compounded annually, determine how much the CD will be worth at the end of 4 years.

$15,958

$13,600

$14,640

$45,730

Question 1f)

Each year a company is required to place money into a bank account to retire its bond's principal at maturity. If the bond's principal is $10 million, and bank interest is estimated at 8%, how much are the annual payments if they are to be made over the last 20 years of the bond's life?

$218,522

$101,853

$462,950

$425,387

Present Value Interest Factor of $1 for 5 years at 12%

None of the above

Explanation / Answer

1 a) Present value intrest factor of $ 1 at 12% for 5 years

1 b) future time perods are to the right of zero

1 c) $ 383.72

1 d) $ 3169.87

1 e) $ 14,640

1 f) $ 218,522

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