Question 1

Which table has a factor of 1.00000 for 1 period at every interest rate?

Accepted Answer

The answer of Which table has a factor of 1.00000...

Question 2

If $10,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

Accepted Answer

The formula for compound interest is $ A = P(1 + r/n)^{nt} $. Here, $ P = 10,000 $, $ r = 0.04 $, $ n = 1 $, and $ t = 5 $. Plugging in these values, $ A = 10,000(1 + 0.04/1)^{1 \times 5} = 10,000(1.04)^5 = 12,167. $

Question 3

Suppose you have a winning lottery ticket and you are given the option of accepting $3,000,000 three years from now or taking the present value of the $3,000,000 now. The sponsor of the prize uses a 5% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is

Accepted Answer

The present value (PV) is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value ($3,000,000), r is the discount rate (5% or 0.05), and n is the number of years (3). Plugging in the values: PV = $3,000,000 / (1 + 0.05)^3 = $2,591,520.

Question 4

If $22,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

Accepted Answer

The future value of an annuity formula is used: FV = P * [(1 + r)^n - 1] / r, where P = $22,000, r = 0.05, n = 10. Plugging in the values gives FV = $22,000 * [(1.05)^10 - 1] / 0.05 = $276,714.

Question 5

If the single amount of $12,500 is to be received in 2 years and discounted at 11%, its present value is

Accepted Answer

The answer of If the single amount of $12,500 is...

Question 6

SCI Company deposits $15,000 in a fund at the end of each year for 7 years. The fund pays interest of 3% compounded annually. The balance in the fund at the end of 7 years is computed by multiplying

Accepted Answer

The balance is calculated using the future value of an annuity factor because the deposits are made at the end of each year, forming an annuity.

Question 7

Which of the following is not necessary to know in computing the future value of an annuity?

Accepted Answer

The year the payments begin is not necessary to know in computing the future value of an annuity. The amount of the periodic payments, interest rate, and number of compounding periods are all essential factors in the calculation.

Question 8

The amount you must deposit now in your savings account paying 5% interest, in order to accumulate $15,000 for your first tuition payment when you start college in 3 years is

Accepted Answer

The answer of The amount you must deposit now in...

Question 9

The future value of an annuity factor for 2 periods is equal to

Accepted Answer

The answer of The future value of an annuity factor...

Question 10

Which of the following discount rates will produce the smallest present value?

Accepted Answer

A higher discount rate results in a smaller present value, so 8% will produce the smallest present value.

Question 11

Common Ground Corporation issued $8,000,000, 10-year bonds and agreed to make annual sinking fund deposits of $620,000. The deposits are made at the end of each year into an account paying 6% annual interest. Common Ground has the following values related to the time value of money and compounded interest decisions. $\begin{array}{lr}
\text { Present value of } 1 \text { for } 10 \text { periods at } 6 \% & 0.55839 \
\text { Future value of } 1 \text { for } 10 \text { periods at } 6 \% & 1.79085 \
\text { Present value of an annuity of } 1 \text { for } 10 \text { periods at } 6 \% & 7.36009 \
\text { Future value of an annuity of } 1 \text { for } 10 \text { periods at } 6 \% & 13.18079
\end{array}$ To the closest dollar, what amount will be in the sinking fund at the end of 10 years?

Accepted Answer

The answer of Common Ground Corporation issued $8,000,000, 10-year bonds...

Question 12

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Accepted Answer

The present value (PV) is calculated using the formula PV = FV / (1 + r)^n, where FV is the future value, r is the discount rate, and n is the number of periods. For $5,000 at 6% for 3 years, PV = 5000 / (1 + 0.06)^3 = $4,198.10.

Question 13

Which of the following accounting problems does not involve a present value calculation?

Accepted Answer

The determination of declining-balance depreciation does not involve a present value calculation as it is a method of calculating depreciation based on a fixed percentage of the asset's book value each period. However, the determination of the market price of a bond, the amount to report for long-term notes payable, and the amount to report for lease liability all involve present value calculations.

Question 14

Present value is based on

Accepted Answer

Present value calculations consider the dollar amount to be received, the length of time until receipt, and the interest rate, as all these factors influence the current worth of future cash flows.

Question 15

If you are able to earn a 15% rate of return, what amount would you need to invest to have $6,500 one year from now?

Accepted Answer

The answer of If you are able to earn a...

Question 16

If $13,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compound annually, what will be the balance of the account at the end of 10 years?

Accepted Answer

The future value of an annuity formula is used: FV = P * [(1 + r)^n - 1] / r, where P = $13,000, r = 0.05, n = 10. Calculating gives FV = $163,512.

Question 17

If you are able to earn a 6% rate of return, what amount would you need to invest to have $6,500 one year from now?

Accepted Answer

The answer of If you are able to earn a...

Question 18

The amount you must deposit now in your savings account paying 6% interest, in order to accumulate $2,000 for a down payment 5 years from now on a new Vintage Convertible Mustang is

Accepted Answer

The answer of The amount you must deposit now in...

Question 19

All of the following are necessary to compute the future value of a single amount except the

Accepted Answer

To calculate the future value of a single amount, the principal (or present value), the interest rate, and the number of periods are required. The maturity value is the future value of the principal and is calculated using the other three variables. Therefore, the maturity value is not necessary to compute the future value of a single amount.

Question 20

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year $1 \quad \$ 30,000$
Year $2 \quad \$ 45,000$ Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

Accepted Answer

The answer of Akers Company is considering purchasing a machine....

Quiz 14: Understanding Investments and Acquisitions in Accounting

Which table has a factor of 1.00000 for 1 period at every interest rate?

If $10,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years?

If $22,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years?

If the single amount of $12,500 is to be received in 2 years and discounted at 11%, its present value is

SCI Company deposits $15,000 in a fund at the end of each year for 7 years. The fund pays interest of 3% compounded annually. The balance in the fund at the end of 7 years is computed by multiplying

Which of the following is not necessary to know in computing the future value of an annuity?

The amount you must deposit now in your savings account paying 5% interest, in order to accumulate $15,000 for your first tuition payment when you start college in 3 years is

The future value of an annuity factor for 2 periods is equal to

Which of the following discount rates will produce the smallest present value?

If the single amount of $5,000 is to be received in 3 years and discounted at 6%, its present value is

Which of the following accounting problems does not involve a present value calculation?

Present value is based on

If you are able to earn a 15% rate of return, what amount would you need to invest to have $6,500 one year from now?

If $13,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compound annually, what will be the balance of the account at the end of 10 years?

If you are able to earn a 6% rate of return, what amount would you need to invest to have $6,500 one year from now?

The amount you must deposit now in your savings account paying 6% interest, in order to accumulate $2,000 for a down payment 5 years from now on a new Vintage Convertible Mustang is

All of the following are necessary to compute the future value of a single amount except the

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year 1$30,0001 \quad \$ 30,0001$30,000 Year 2$45,0002 \quad \$ 45,0002$45,000 Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?

Akers Company is considering purchasing a machine. The machine will produce the following cash flows: Year $1 \quad \$ 30,000$ Year $2 \quad \$ 45,000$ Akers requires a minimum rate of return of 10%. What is the maximum price Akers should pay for this machine?