ch 5

How much would $100, growing at 5% per year, be worth after 75 years? a- 3883.27 b- 4495.37 c- 4077.43 d- 4281.30 e- 3,689.11

a- 3883.27

Which is correct? a- timelines can be constructed for annuities where the payments occur at either the beginning or the end of the periods b- Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts. c-Time lines are not useful for visualizing complex problems. d-Time lines cannot be constructed in situations where some of the cash flows occur monthly but others occur quarterly. e-A time line is not meaningful unless all cash flows occur annually.

a- timelines can be constructed for annuities where the payments occur at either the beginning or the end of the periods

If Kara has $5000 invested in Northern Bank, which pays 3.5% annually, how long will it take for her finds to triple? a- 26.49 b- 29.46 c- 22.58 d- 27.98 e- 23.99

b- 29.46

Assume that you have analyzed the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following possible changes in the scenario would lower the calculated value of the investment? a- The discount rate decreases. b- The discount rate increases. c- The cash flows are in the form of a deferred annuity, and they total $100,000. d- You learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for $20,000 rather than for $10,000. e- The riskiness of the investment's cash flows decreases. f- The total amount of cash flows remains the same but more of the cash flows are received in the earlier years and less are received in the later years.

b- The discount rate increases.

Choose the CORRECT statement. a- Time lines cannot be constructed in situations where some of the cash flows occur annually but others occur quarterly. b- Time lines are useful for visualizing complex problems prior to doing actual calculation c- Time lines are only useful for evaluating long-term debt. d- Time lines cannot be constructed for annuities where the payments occur at the beginning of the periods. e- Some of the cash flows shown on a time line can be in the form of annuity payments, but none can be uneven amounts.

b- Time lines are useful for visualizing complex problems prior to doing actual calculation

Last year Dania Corporation's sales were $525 million. If sales grow at 7.5% per year, how large (in millions) will they be 8 years later? a- 889.51 b- 1032.30 c- 936.33 d- 983.14 e- 845.03

c- 936.33

Which of the following statements about the present value of an annuity is CORRECT? a- It is impossible to get a negative number when you solve for I. b- If you have a series of cash flows, each of which is positive, you can solve for 1, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0. c- You can still solve for I, even if CF0 is positive and all the other CFs are negative. d- To solve for I, you must identify the value of that causes the PV of the positive CFs to equal the absolute value of the FV of the negative CFs. It is impossible to find the value of l without a computer or financial calculator e- If you have a series of cash flows, and CF 0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost.

c- You can still solve for I, even if CF0 is positive and all the other CFs are negative.

Assume that you purchase a 6-year, 8% savings certificate for $1,000. If interest is compounded annually, what will be the value of the certificate when it matures? a- 1469.33 b- 1766.33 c- 1667.10 d- 1586.87 e- 630.17

d- 1586.87

Assume that you have analyzed the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following possible changes in the scenario would increase the calculated value of cash flows from an investment? a- The cash flows are in the form of a deferred annuity, and they total $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each payment is for $10,000 rather than for $20,000. b- The total amount of cash flows remains the same, but more of the cash flows are received in the later years and less are received in the earlier years. c- The discount rate increases. d- The discount rate decreases. e- The riskiness of the investment's cash flows increases.

d- The discount rate decreases.

Choose the CORRECT statement from the list. a- Time lines can only be constructed for annuities where the payments occur at the end of the periods, i.e., for ordinary annuities. b- Time fines cannot be constructed to deal with situations where some of the cash flows occur annually but others occur quarterly. c- Time lines are not useful for visualizing complex problems prior to doing actual calculations. d- Time lines can be constructed where some of the payments constitute a annuity but others are unequal and thus are not part of the annuity. e- A time line is not meaningful unless all cash flows occur annually usually

d- Time lines can be constructed where some of the payments constitute a annuity but others are unequal and thus are not part of the annuity.

Which of the following statements about annuity calculations is CORRECT? a- If you have a series of cash flows, and CF 0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost. b- It is impossible to get a negative number when you solve for I; you must have made a mistake. c- If CF 0 is positive and all the other CFs are negative, then you cannot solve for d- To solve for l, you must try different values for I until you find the = one that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is a difficult procedure to do without a computer or financial calculator. e- If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.

d- To solve for l, you must try different values for I until you find the = one that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is a difficult procedure to do without a computer or financial calculator.

Jose now has $500. How much would he have after 6 years if he leaves it invited at 5.5% with annual compounding?a- 622.20 b-723.89 c-654.95 d-689.42 e-591.09

d-689.42

Which of the following statements about annuities is CORRECT? a- If a series of unequal cash flows occurs at regular intervals, such as once a year, then the series is by definition an annuity b- The cash flows for an annuity due must all occur at the ends of the periods. c- "Variable annuity" is defined as the situation in which some cash flows occur at the beginning of the periods while others occur at the ends. d- The cash flows for an ordinary (or deferred) annuity always occur at beginning of the periods. e- The cash flows for an annuity must all be equal, and they must occur a regular intervals, such as once a year or once a month.

e- The cash flows for an annuity must all be equal, and they must occur a regular intervals, such as once a year or once a month.

Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures? a- 1,870.61 b-2,165.46 c-1,964.14 d-2.062.34 e-1.781.53

e-1.781.53