Question 1

What is the future value of $1,500 invested at a 5% rate for 7 years?&#10;A) $2,103.83&#10;B) $1,066.02&#10;C) $12,213.01&#10;D) $2,110.65

Accepted Answer

$2,110.65&#10;

Question 2

What is the present value of $7,500 to be received in 8 years if 6% is the proper discount rate?&#10;A) $46,573.45&#10;B) $4,705.59&#10;C) $4,726.27&#10;D) $11,953.86

Accepted Answer

The present value (PV) can be calculated using the formula: PV = FV / (1 + r)^n, where FV is the future value ($7,500), r is the discount rate (6% or 0.06), and n is the number of periods (8 years). Plugging these values into the formula gives: PV = $7,500 / (1 + 0.06)^8 = $4,705.59.

Question 3

A money multiplier certificate is selling for $8,000 today and promises to be worth $10,000 in 3 years. What is the rate of return on this investment?&#10;A) 7.17%&#10;B) 19.28%&#10;C) 7.72%&#10;D) 11.93%

Accepted Answer

The rate of return can be calculated using the formula for the annual compound interest rate: $$r = \left(\frac{FV}{PV}\right)^{\frac{1}{n}} - 1$$ where $FV$ is the future value ($10,000), $PV$ is the present value ($8,000), and $n$ is the number of years (3). Plugging in the values gives $$r = \left(\frac{10000}{8000}\right)^{\frac{1}{3}} - 1 = 1.25^{\frac{1}{3}} - 1 \approx 0.0772$$ or 7.72%.

Question 4

The Moose Lodge can afford to pay $12,000 at the end of each of the next 30 years to repay a mortgage on their hotel property. If the interest rate is 5.50%, what is the most The Moose Lodge can borrow?

A) $174,404.94
B) $869,225.74
C) $218,181.82
D) $360,000.00

Accepted Answer

The most The Moose Lodge can borrow is calculated using the present value of an annuity formula, which factors in the annual payment, interest rate, and number of periods. Given the annual payment of $12,000, an interest rate of 5.50%, and a term of 30 years, the correct calculation results in option A, $174,404.94, as the maximum amount that can be borrowed.

Question 5

You plan to invest $2,000 at the end of each of the next 25 years. If the investment earns 7% annually, what is the investment worth at the end of 25 years?&#10;A) $132,748.33&#10;B) $23,307.17&#10;C) 10,854.87&#10;D) $126,498.08

Accepted Answer

The answer of You plan to invest $2,000 at the...

Question 6

The correlation coefficient ranges from -1.0 to +1.0.

Accepted Answer

The correlation coefficient, which measures the strength and direction of a linear relationship between two variables, indeed ranges from -1.0 (perfect negative correlation) to +1.0 (perfect positive correlation), with 0 indicating no linear correlation.

Question 7

The impact of the accounting scandals that have taken place was&#10;A) to prove that all audits are just about worthless.&#10;B) increased investor scrutiny regarding financial statements and the audit process.&#10;C) to eliminate the need for accountants from the financial reporting process.&#10;D) such that accountants can no longer use estimates when compiling financial statements.

Accepted Answer

Accounting scandals have led to increased investor scrutiny regarding financial statements and the audit process as stakeholders demand greater transparency and accountability to prevent future frauds.

Deck 4: Time Value of Money, Relationship Between Risk and Return, Review of Financial Statements and Selected Ratios