Deck 14: Applying Present and Future Values

Question 1

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in 5 years.
FV Factor = Future Value/Present Value
FV Factor = $7,210.65/$5,300 = 1.3605
1.3605 is the future value of $1 factor for 4 periods at 8%

Answer 1

False

Question 2

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000.
Present Value = Future Value * Interest Factor for 9 years @8%
Present Value = $2,000 * 0.5002 = $1,000

Answer 2

True

Question 3

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The future value of an ordinary annuity is the accumulated value of each annuity payment excluding interest as of the date of the final payment.

Answer 3

False

Question 4

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The number of periods in a present value calculation may only be expressed in years.

Question 5

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Interest is the borrower's payment to the owner of an asset for its use.

Question 6

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462.
n = 6 semiannual periods, i = 5% semiannual interest rate; from the PV of $1 table the factor is 0.7462

Question 7

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The future value of $100 compounded semiannually for 3 years at 12% equals $140.49.
Future Value = Present Value * Interest Factor
FV of 1 factor for n = 6 and i = 6% = 1.4185
Future Value = $100 * 1.4185 = $141.85

Question 8

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Sandra has a savings account that has accumulated to $50,000. She started with $28,225, and earned interest at 10% compounded annually. It took her five years to accumulate the $50,000.
PV Factor = Present Value/Future Value
PV Factor = $28,225/$50,000 = 0.5645
0.5645 is the present value of 1 factor for 6 periods at 10%

Question 9

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An interest rate is also called a discount rate.

Question 10

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know the worth of the asset at the future date.

Question 11

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 From the perspective of an account holder, a savings account is a liability with interest.

Question 12

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An annuity is a series of equal payments occurring at equal intervals.

Question 13

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The number of periods in a future value calculation may only be expressed in years.

Question 14

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Future value can be found if the interest rate (i), the number of periods (n), and the present value (p) are known.

Question 15

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 With deposits of $5,000 at the end of each year, you will have accumulated $38,578 at the end of the sixth year if the annual rate of interest is 10%.
7.7156 is the FV factor on the Future Value of an Annuity table; n = 6; i = 10%
Future Value of an Annuity = Annuity * FV Factor
Future Value of an Annuity = $5,000 * 7.7156 = $38,578

Question 16

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value of $5,000 per year for three years at 12% compounded annually is $12,009.
2.4018 is the PV factor on the Present Value of an Annuity table; n = 3; i = 12%
Present Value of an Annuity = Annuity * PV Factor
Present Value of an Annuity = $5,000 * 2.4018 = $12,009

Question 17

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A series of equal payments made or received at the end of each period is an ordinary annuity.

Question 18

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.

Question 19

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 In a present value or future value table, the length of one time period may be interpreted as one year, one month, or any other length of time.

Question 20

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The present value of an annuity table can be used to determine the value today of a series of payments to be received in the future.

Question 21

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company expects to invest $5,000 today at 12% annual interest and plans to receive $15,529 at the end of the investment period. How many years will elapse before the company accumulates the $15,529?

A)0.322 years
B)3.1058 years
C)5 years
D)8 years
E)10 years

Question 22

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?

A)12%
B)6%
C)3%
D)2%
E)1%

Question 23

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return compounded annually?

A)$55,606
B)$137,681
C)$222,425
D)$265,764
E)$350,000

Question 24

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Marshall has received an inheritance and wants to invest a sum of money today that will yield $5,000 at the end of each of the next 10 years. Assuming he can earn an interest rate of 5% compounded annually, how much of his inheritance must he invest today?

A)$50,000.00
B)$47,500.00
C)$45,125.00
D)$38,608.50
E)$100,000.00

Question 25

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest compounded quarterly. How much will Keisha have accumulated after 2 years?

A)$4,433.80
B)$4,340.00
C)$4,390.40
D)$3,920.00
E)$3,500.00

Question 26

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 What amount can you borrow if you can make six future quarterly payments of $4,000 at a 12% annual rate of interest?

A)$24,838.00
B)$21,668.80
C)$31,049.00
D)$40,000.00
E)$44,800.00

Question 27

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 If we want to know the value of present-day assets at a future date, we can use:

A)Present value computations.
B)Annuity computations.
C)Interest computations.
D)Future value computations.
E)Earnings computations.

Question 28

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jessica received a gift of $7,500 at the time of her high school graduation. She invests it in an account that yields 10% compounded semi-annually. What will the value of Jessica's investment be at the end of 5 years?

A)$8,250.00
B)$11,250.00
C)$12,216.75
D)$9,375.00
E)$10,500.00

Question 29

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jason has a loan that requires a single payment of $4,000 at the end of 3 years. The loan's interest rate is 6%, compounded semiannually. How much did Jason borrow?

A)$3,358.40
B)$4,000.00
C)$3,660.40
D)$4,776.40
E)$3,350.00

Question 30

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An individual is planning to set-up an education fund for her daughter. She plans to invest $7,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 9 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 9 years?

A)$87,413
B)$68,040
C)$50,400
D)$126,000
E)$45,360

Question 31

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 What amount can you borrow if you can make seven future semiannual payments of $4,000 at an 8% annual rate of interest?

A)$28,000.00
B)$25,760.00
C)$31,049.00
D)$24,008.40
E)$35,691.20

Question 32

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50?

A)4 years
B)5 years
C)6 years
D)2 years
E)10 years

Question 33

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 What interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000?

A)5%
B)8%
C)10%
D)12%
E)15%

Question 34

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Interest may be defined as:

A)Time.
B)A borrower's payment to the owner of an asset for its use.
C)The future value of a present amount.
D)Always a liability.
E)Always an asset.

Question 35

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Cody invests $1,800 per year from his summer wages at a 4% annual interest rate. He plans to take a European vacation at the end of 4 years when he graduates from college. How much will he have available to spend on his vacation?

A)$7,787.52
B)$7,488.00
C)$6,912.00
D)$7,200.00
E)$7,643.70

Question 36

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Marc Lewis expects an investment of $25,000 to return $6,595 annually. His investment is earning 10% per year. How many annual payments will he receive?

A)Five payments
B)Six payments
C)Four payments
D)Three payments
E)More than six payments

Question 37

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Patricia wants to invest a sum of money today that will yield $10,000 at the end of 6 years. Assuming she can earn an interest rate of 6% compounded annually, how much must she invest today?

A)$7,050
B)$9,400
C)$6,000
D)$8,836
E)$8,306

Question 38

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is considering an investment that will return $22,000 at the end of each semiannual period for 4 years. If the company requires an annual return of 10%, what is the maximum amount it is willing to pay for this investment?

A)Not more than $69,738
B)Not more than $139,476
C)Not more than $88,000
D)Not more than $142,190
E)Not more than $176,000

Question 39

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 years. The annual interest rate on the loan is 12%. What is the present value of the building?

A)$72,096
B)$113,004
C)$147,202
D)$86,590
E)$200,000

Question 40

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An individual is planning to set-up an education fund for his grandchildren. He plans to invest $10,000 annually at the end of each year. He expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years?

A)$46,320
B)$67,107
C)$100,000
D)$144,866
E)$215,890

Question 41

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Sheryl Frasier has won the Indiana state lottery when the jackpot was $9 million. She has chosen to take the prize winnings as $1 million per year over the next nine years. Using a 7% annual interest rate, determine the present value of the $1 million annuity Sheryl will receive.

A)$9,000,000
B)$8,370,000
C)$6,515,200
D)$5,670,000
E)$4,895,100

Question 42

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company has $50,000 today to invest in a fund that will earn 7% compounded annually. How much will the fund contain at the end of 8 years?

Question 43

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?

Question 44

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is creating a fund today by depositing $65,763. The fund will grow to $90,000 after 8 years. What annual interest rate is the company earning on the fund?

Question 45

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Dave wants to retire now but isn't at the eligible retirement age to draw his pension. He has some investment savings and wants to be able to take out $25,000 at the end of each of the next 5 years. His investment pays an average of 6% annual interest. What is the present value of the funds that Dave will be drawing from his investment account?

A)$125,000.00
B)$117,500.00
C)$41,666.67
D)$93,412.50
E)$105,310.00

Question 46

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?

Question 47

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company has $46,000 today to invest in a fund that will earn 4% compounded annually. How much will the fund contain at the end of 6 years?

A)$58,204
B)$47,840
C)$58,075
D)$57,040
E)$62,582

Question 48

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded annually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?

A)$141,000
B)$112,095
C)$100,000
D)$111,615
E)$105,000

Question 49

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today?

A)$16,150
B)$13,600
C)$11,504
D)$13,986
E)$15,343

Question 50

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $200,000 in 4 years, and will create a fund to insure that amount will be available. If it can earn a 7% return compounded annually, how much must the company invest in the fund today to equal the $200,000 at the end of 4 years?

Question 51

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is setting aside $21,354 today, and wishes to have $30,000 at the end of three years for a down payment on a piece of property. What interest rate must the company earn?

Question 52

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company needs to have $150,000 in 5 years, and will create a fund to insure that the $150,000 will be available. If it can earn a 6% return compounded semiannually, how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?

A)$141,000
B)$112,095
C)$100,000
D)$111,615
E)$105,000

Question 53

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Jackson has a loan that requires a $17,000 lump sum payment at the end of four years. The interest rate on the loan is 5%, compounded annually. How much did Jackson borrow today?

Question 54

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The Masterson family is setting up a vacation fund, and they plan on depositing $1,000 per quarter in an investment that will pay 12% annual interest. What amount will they have available for their vacation at the end of 2 years?

A)$8,000.00
B)$8,960.00
C)$8,892.30
D)$8,240.00
E)$8,487.20

Question 55

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Garcia Brass Fixtures is planning on replacing one of its machines in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1. The deposits will earn 10% interest. How much money will Garcia have accumulated at the end of five years to replace the machine?

Question 56

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Mason Company has acquired a machine from a dealer that requires a single payment of $45,000 at the end of five years. This transaction includes interest at 8%, compounded semiannually. What is the value of the machine today?

Question 57

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of the next five years. This transaction includes interest at 9%, compounded annually. What is the value of the machine today?

Question 58

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Kelsey has a loan that requires a $25,000 lump sum payment at the end of three years. The interest rate on the loan is 5%, compounded annually. How much did Kelsey borrow today?

Question 59

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Trey has $105,000 now. He has a loan of $175,000 that he must pay at the end of 5 years. He can invest his $105,000 at 10% interest compounded semiannually. Will Trey have enough to pay his loan at the end of the 5 years? If not, by how much will he be short?

Question 60

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Clara is setting up a retirement fund, and she plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take her to reach her retirement goal of $69,082?

A)13.816 years
B)0.072 years
C)10 years
D)20 years
E)5 years

Question 61

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The interest rate is also called the __________________ rate.

Question 62

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each. How much is the company able to borrow if the annual interest rate is 10% compounded semiannually?

Question 63

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 When you reach retirement age, you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702. The fund will earn 6% per year. For how many years will you be able to draw an even amount of $14,702?

Question 64

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is beginning a savings plan to purchase a new building. It will be saving $43,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 9% interest?

Question 65

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Giuliani Co. lends $524,210 to Craig Corporation. The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Craig paying on the loan?

Question 66

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for 7 years. What is the amount of the annual deposits that the company must make?

Question 67

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 An _____________ is a series of equal payments occurring at equal intervals.

Question 68

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is beginning a savings plan. It will be saving $15,000 per year for the next 10 years. How much will the company have accumulated after the tenth year-end deposit, assuming the fund earns 10% interest compounded annually?

Question 69

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company is beginning a savings plan to purchase new equipment when the current equipment is expected to wear out. It will be saving $7,500 every six months for the next 10 years. How much will the company have accumulated after the last year-end deposit, assuming the fund earns 10% interest compounded semiannually?

Question 70

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 City Peewee League borrowed $883,212, and must make annual year-end payments of $120,000 each. If City's interest rate is 6%, how many years will it take to pay off the loan?

Question 71

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 You are little late planning your retirement, but are looking forward to retiring in 10 years. You expect to save $6,000 a year at an annual rate of 8%. How much will you have accumulated when you retire?

Question 72

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 To calculate present value of an amount, two factors are required: The __________________ and the ___________________.

Question 73

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each. How much is the company able to borrow if the interest rate is 9% compounded annually?

Question 74

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 The future value of an ________________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

Question 75

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 Milton Shirer has won the New York state lottery when the jackpot was $20 million. He has the options of taking the prize winnings as $2 million per year over the next ten years or a single payment now of $13,000,000. Which option should Milton choose based on present value principles and assuming an 8% annual interest rate compounded annually?

Question 76

Present Value of 1 Future Value of 1 Present Value of an Annuity of 1 Future Value of an Annuity of 1 _____________ is a borrower's payment to the owner of an asset for its use.