FIN3304 FINANCIAL MANAGEMENT

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How long would it take for you to save an adequate amount for retirement if you deposit​ $40,000 per year into an account beginning today that pays 12 percent per year if you wish to have a total of​ $1,000,000 at​ retirement? A. 11.5 years B. 14.8 years C. 12.2 years D. 10.5 years

A. 11.5 years

In comparing an ordinary annuity and an annuity​ due, which of the following is​ true? A. The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. B. The present value of an annuity due is always less than the future value of an otherwise identical ordinary​ annuity, since one less payment is received with an annuity due. C. All things being​ equal, one would prefer to receive an ordinary annuity compared to an annuity due. D. The future value of an ordinary annuity is always greater than the future value of an otherwise identical annuity due.

A. The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity.

The amount of money that would have to be invested today at a given interest rate over a specified period in order to equal a future amount is called​ ________. A. present value B. future value C. compounded value D. future value of an annuity

A. present value

Dorothy borrows​ $10,000 from the bank. For a four - year ​loan, the bank requires annual end - of - year payments of​ $3,223.73. The annual interest rate on the loan is​ ________. A. 12 percent B. 11 percent C. 9 percent D. 10 percent

B. 11 percent

The present value of a​ $20,000 perpetuity at a 7 percent discount rate is​ ________. A. ​$325,000 B. ​$285,714 C. ​$140,000 D. ​$186,915

B. ​$285,714

Mary will receive​ $12,000 per year for the next 10 years as royalty for her work on a finance book. What is the present value of her royalty income if the opportunity cost is 12​ percent? Assume that payments come at the end of each year. A. ​$210,585 B. ​$67,803 C. ​$75,939 D. ​$235,855

B. ​$67,803

James plans to fund his individual retirement​ account, beginning​ today, with 20 annual deposits of​ $2,000. If he can earn an annual compound rate of 8 percent on his​ deposits, the amount in the account 20 years from today will be​ ________. A. ​$91,524 B. ​$98,846 C. ​$19,636 D. ​$21,207

B. ​$98,846

Alexis owns stock in a company which has consistently paid a growing dividend over the last 10 years. The first year Alexis owned the​ stock, she received​ $4.50 per share and in the 10th​ year, she received​ $4.92 per share. What is the annual growth rate of the dividends over the last 10​ years? A. 14.8 percent B. 12.2 percent C. 0.90 percent D. 15 percent

C. 0.90 percent

How many years would it take for Harry to save an adequate amount for retirement if he deposits​ $2,000 per month into an account beginning today that pays 12 percent per year if he wishes to have a total of​ $1,000,000 at​ retirement? A. 12 years B. 13 years C. 16 years (INCORRECT ANSWER) D. 15 years

C. 15 years

The time value​ concept/calculation used in amortizing a loan is​ ________. A. future value of a dollar B. future value of an annuity C. present value of an annuity D. present value of a dollar

C. present value of an annuity

Thelma is planning for her​ son's college education to begin five years from today. She estimates the yearly​ tuition, books, and living expenses to be​ $5,000 per year for a four - year ​degree, assuming the expenses incur only at the end of the year. How much must Thelma deposit​ today, at an interest rate of 8​ percent, for her son to be able to withdraw​ $5,000 per year for four years of​ college? A. ​$39,520 B. ​$13,620 C. ​$11,270 D. ​$20,000

C. ​$11,270

Nico makes annual end - of - year payments of​ $5,043.71 on a four - year loan with an interest rate of 13 percent. The original principal amount was​ ________. A. ​$20,175 B. ​$24,450 C. ​$15,000 D. ​$3,100

C. ​$15,000

You receive​ $1,000 in 1​ year, $1,200 in 2​ years, and​ $1,300 in 3 years. The present value today of these future receipts is​ ________ if the opportunity cost is 7 percent. A. ​$2,500 B. ​$4,036 C. ​$3,044 D. ​$3,257

C. ​$3,044 $1000 in 1 year (7%)= $934.58 $1,200 in 2 year (7%)= $1048.13 $1300 in 3 year(7%) = $1061.19 Total = $3,043.90 (or $3,044.00 rounded to nearest dollar)

The future value of a​ $2,000 annuity due deposited at 8 percent compounded annually for each of the next 10 years is​ ________. A. ​$28,973 B. ​$14,494 C. ​$31,291 D. ​$13,420

C. ​$31,291

You receive​ $1,200 today,​ $2,200 in one​ year, and​ $3,300 in two years. If you deposit these cash flows in an account earning​ 12%, how much money is in the account three years from​ now? A. ​$7,269 B. ​$5,554 C. ​$8,142 D. ​$6,221

C. ​$8,142

The future value of​ $100 received today and deposited at 6 percent for four years is closest to​ ________. A. ​$ 79 B. ​$116 C. ​$124 D. ​$126

D. ​$126

The future value of​ $100 received today and deposited in an account for four years paying semiannual interest of 6 percent is​ ________. A. ​$889 B. ​$134 C. ​$450 D. ​$127

D. ​$127

Janice would like to send her parents on a cruise for their 25th wedding anniversary. She has priced the cruise at​ $15,000, and she has 5 years to accumulate this money. How much must Janice deposit annually in an account paying 10 percent interest in order to have enough money to send her parents on the​ cruise? A. ​$1,862 B. ​$3,000 C. ​$2,234 D. ​$2,457

D. ​$2,457

The rate of interest agreed upon contractually charged by a lender or promised by a borrower is the​ ________ interest rate. A. continuous B. discounted C. nominal D. effective

c. nominal (INCORRECT ANSWER)


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