1. Your daughter received a tax refund and immediately and wished to put the money into
a savings account at the local bank. She asked you how much she would accumulate if
she invested the entire amount in the bank for exactly two years. What information would
you need in order to correctly answer her question? Amount How often bank Interest
Rate placed in savings compounds interest (Points : 2) yes yes yes
2. The Holiday Family Fun Center is for sale at an asking price of $400,000. The audited
financial statements show that the business generates approximately $43,000 per year in
net cash flow. You believe you could operate the business for 3 years and sell it for
$500,000. What is the maximum amount you would be willing to pay for the business if
you wish to earn at least a 10% return on your investment? (Points : 2) $482,590
3. Determining the monthly payments necessary to pay off a car loan of $25,000 in 5
years involves which of the following concepts? (Points : 2) present value of an
annuity
4. What amount must be invested at 10% to amount to $1,000 at the end of 15 periods?
(Points : 2) $315
5. If you needed to have $15,000 in 5 years, you would use a present value of single
amount table to compute the amount you would need to invest annually to accumulate
$15,000. (Points : 2) False
6. What is the amount of each periodic payment that a worker must make at the end of
each period for eight periods to accumulate a savings account of $100,000 by the end of
the eighth period to help pay his retirement, assuming the bank pays 5% interest? (Points
: 2) $10,472
7. Summerville Dental Clinic is considering acquisition of sophisticated new x-ray
equipment costing $100,000. The present value of expected net cash flows (except for
purchase cost) from this equipment is $120,000 when discounted at 10%. From this
information, we can conclude that the (Points : 2) expected rate of return is greater
than 10%
8. When a borrower obtains a bank loan at 8% interest, the rate of return earned by the
bank on this loan (Points : 2) cannot be determined without more information
9. Investment opportunities being evaluated by companies often require the use of
present value calculations. (Points : 2) True
10. What is the present value of an ordinary annuity requiring payments of $10,000 to be
made over 16 periods at 10%? (Points : 2) $78,240
11. The Turbo Speedboat Company has just acquired new manufacturing equipment. No
down payment was made, but four year-end payments of $2,400 will be required to pay
for the machine. If 8% is the appropriate rate, at what amount should Turbo Speedboat
Company record the new equipment on its books? (Points : 2) $7,949
12. How much would you have to invest today at 6% interest to have $30,000 at the end
of five periods? (Points : 2) $$22,418
13. An annuity is a series of equal or unequal amounts received or paid over a specified
number of equal time periods. (Points : 2) False
14. An annuity in which amounts are paid or received at the end of each fiscal period is
a(n) (Points : 2 ordinary annuity
15. If you invest $4,000 for five years at 8% interest, what would be the total amount of
interest earned by the investment? (Points : 2) $1,877
16. The ______ value of an amount is the value of that amount on a particular date prior
to the time the amount is paid or received. (Points : 2) present
17. A higher interest rate will always result in a higher present value. (Points : 2) False
18. A $10,000 loan was obtained from a bank at 12% annual interest. The loan is to be
repaid in four equal year-end installments. What amount of interest revenue should be
recognized by the bank for the second year of the loan? (Points : 2) $949
19. Hospice Care, Inc. is seeking a bank loan to finance expanded working capital over
the next two years. The firm has budgeted $1,000 for monthly loan payments. If the firm
can borrow at 1% monthly, how large a loan can be obtained? (Points : 2$21,243
20. What amount would accumulate if you invested $1,000 at the end of each period for
21 periods at 10%? (Points : 2) $64,003
Urgency: HIGH