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- From: Business,
- Posted on: Thu 21 Mar, 2013
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Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Interest compounded annually is 10%.

Periods Present Value of $1

Discounted at 10% per Period

1 1.080

1 0.909

2 0.826

3 0.751

4 0.683

5 0.621

What is the present value today of $6,000 to be received six years from today?

$6,000 × 0.683 × 3

$6,000 × 0.909 × 6

$6,000 × 0.751 × 2

$6,000 × 0.621 × 0.909

Given below are the future value factors for 1 at 8% for one to five periods. Interest compounded annually is 8%.

Periods Future Value of 1 at 8%

1 1.080

2 1.166

3 1.260

4 1.360

5 1.469

If $3,000 is put in a savings account today, what amount will be available three years from today?

($3,000 × 1.080) + ($3,000 × 1.166) + ($3,000 × 1.260)

$3,000 ÷ 1.260

$3,000 × 1.260

$3,000 × 1.080 × 3

Ethan has $80,000 to invest today at an annual interest rate of 4%. Approximately how many years will it take before the investment grows to $162,000?

11 years.

18 years.

20 years.

16 years.

Dunston Company will receive $200,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $102,632. In how many years is the $200,000 received?

7 years

6 years

8 years

5 years

What would you pay for an investment that pays you $3,000,000 after forty years? Assume that the relevant interest rate for this type of investment is 6%.

$93,540.

$311,010.

$935,400.

$291,660.

The figure .94232 is taken from the column marked 2% and the row marked three periods in a certain interest table. From what interest table is this figure taken?

Future value of 1

Future value of annuity of 1

Present value of 1

Present value of annuity of 1

Angie invested $100,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?

$155,134.

$161,050.

$162,890.

$177,156.

Which of the following statements is true?

If a single sum is due on December 31, 2012, the present value of that sum decreases as the date draws closer to December 31, 2012.

If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today.

The process of accumulating interest on interest is referred to as discounting.

The higher the discount rate, the higher the present value.

Mordica Company will receive $250,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $250,000 receipt is

$377,500.

$127,500.

$487,180.

$128,290.

Which of the following situations does NOT base an accounting measure on present values?

Sinking funds.

Leases.

Prepaid insurance.

Pensions.

Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $10,000 for her dream vacation. If she is able to earn 8% per annum on an investment, how much will she have to set aside today so that she will have sufficient funds available?

$2,219.

$13,604.

$7,350.

$6,806.

Altman Company will invest $500,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is

$669,115.

$650,000.

$670,145.

$500,000.

John Jones won a lottery that will pay him $2,000,000 after twenty years. Assuming an appropriate interest rate is 5% compounded annually, what is the present value of this amount?

$5,306,600.

$24,924,420.

$753,780.

$2,000,000.

Given below are the present value factors for $1.00 discounted at 10% for one to five periods. Interest compounded annually is 10%.

Periods Present Value of $1

Discounted at 10% per Period

1 1.080

1 0.909

2 0.826

3 0.751

4 0.683

5 0.621

What amount should be deposited in a bank today to grow to $3,000 three years from today?

$3,000 × 0.909 × 3

($3,000 × 0.909) + ($3,000 × 0.826) + ($3,000 × 0.751)

$3,000 ÷ 0.751

$3,000 × 0.751

Which of the following tables would show the smallest value for an interest rate of 5% for six periods?

Present value of an ordinary annuity of 1

Future value of an ordinary annuity of 1

Present value of 1

Future value of 1

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