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com

app B
Student:

1. 2. 3. 4.

Interest is the payment to the owner of an asset for its use by a borrower. True False From the perspective of a depositor, a savings account is a liability with interest. True False An interest rate is also called a discount rate. True False A company can use present and future value computations to estimate the interest component of holding assets over time. True False

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 5. The number of periods in a present value calculation can only be expressed in years. True False

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6. 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. True False 7. 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 its worth at the future date. True False 8. 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. True False 9. The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000. True False 10. 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. True False

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 11. Future value can be found if the interest rate (i), the number of periods (n), and the present value (p) are known. True False 12. The number of periods in a future value calculation can only be expressed in years. True False 13. The future value of $100 compounded semiannually for 3 years at 12% equals $140.49. True False 14. At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in 5 years. True False 15. An annuity is a series of equal payments. True False 16. The present value of an annuity table can be used to determine the series of equal payments that are required by a loan agreement. True False 17. An ordinary annuity refers to a series of equal payments made or received at the end of each period. True False 18. The present value of $5,000 per year for three years at 12% compounded annually is $12,009. True False 19. 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% True False 20. The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment. True False 21. Interest is: A. Time. B. A borrower's payment to the owner of an asset for its use. C. The same as a savings account. D. Always a liability. E. Always an asset. 22. Which interest rate column would you use from a present value table or a future value table for 8% compounded quarterly? A. 12%. B. 6%. C. 3%. D. 2%. E. 1%. 23. 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? A. $55,606. B. $137,681. C. $222,425. D. $265,764. E. $350,000.

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 24. Sam 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 Sam borrow? A. $3,358.40 B. $4,000.00 C. $3,660.40 D. $4,776.40 E. $3,350.00 25. 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. 26. 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 27. 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. 28. 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%. 29. Crowe 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 30. Jon Shear 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.

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 31. A company is considering an investment that will return $20,000 semiannually 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 $63,398. B. Not more than $126,796. C. Not more than $80,000. D. Not more than $129,264. E. Not more than $160,000. 32. What amount can you borrow if you make six 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. 33. An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She 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. $144,870. E. $215,890. 34. Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest. How long will it take him to reach his retirement goal of $69,080? A. 13.816 years B. 0.072 years C. 10 years D. 20 years E. 5 years 35. What is interest?

36. Explain the concept of the present value of a single amount.

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 37. Explain the concept of the future value of a single amount.

38. Explain the concept of the present value of an annuity.

39. Explain the concept of the future value of an annuity.

40. A company needs to have $200,000 in 4 years, and will create a fund to insure that the $200,000 will be available. If they can earn a 7% return, how much must the company invest in the fund today to equal the $200,000 at the end of 4 years?

41. Annette has a loan that requires a $25,000 payment at the end of three years. The interest rate on the loan is 5%, compounded annually. How much did Annette borrow today?

42. Thompson Company has acquired a machine from a dealer that requires a 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?

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 43. 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?

44. 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?

45. A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund contain at the end of 8 years?

46. Troy 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 Troy have enough to pay his loan at the end of the 5 years?

47. Madera Iron Sculpting is planning on replacing one of its robotic welders in five years by making a onetime 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 Sierra have accumulated at the end of five years to replace the welder?

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 48. A company borrows money from the bank by promising to make 6 annual year-end payments of $25,000 each. How much is the company able to borrow if the interest rate is 9%?

49. 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 interest rate is 10% compounded semiannually?

50. 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?

51. Big League Sports borrowed $883,212, and must make annual year-end payments of $120,000 each. If Big League's interest rate is 6%, how many years will it take Big League Sports to pay off the loan?

52. Daley Co. lends $524,210 to Davis Corporation. The terms of the loan require that Davis make six semiannual period-end payments of $100,000 each. What semiannual interest rate is Davis paying

on the loan?

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 53. 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?

54. 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?

55. 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?

56. ___________is a borrower's payment to the owner of an asset for its use. 53. The interest rate is also called the rate.

53. To calculate present value of an amount, two factors are required:________________and . 53. An_____________is a series of equal payments occurring at equal intervals. 53. The future value of an____________annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

app B Key
1. 2. 3. 4. 5. 6. 7. 8. 9. 1. 2. 3. 4. 5. 6. 7. 8. 9.
TRUE FALSE TRUE TRUE FALSE TRUE FALSE TRUE TRUE FALSE TRUE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE FALSE B D C E E A C B C

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

21. 22. 23. 24. 25. 26.

A D B D C Interest represents a borrower's payment to an owner of an asset in exchange for its use.

o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com 36. The present value of a single amount to be received at a future date is equal to the amount that can be invested now at the specified interest rate to yield the future value. 37.
interest. The future value of a single amount is equal to the amount that would accumulate at a future date at a specified rate of

38. The present value of an annuity is the amount that can be invested now at the specified interest rate to yield a series of equal periodic payments. 39. The future value of an annuity to be invested at a specified rate of interest is the amount that would accumulate at the date of the final periodic payment.
Feedback: $200,000 x 0.7629 = $ 152,580

36.

Answers will vary

Feedback: $25,000 x 0.8638 = $21,595 40. Answers will vary

Feedback: $45,000 x 0.6756 = $30,402 41. Answers will vary

This is the future value of 1 factor for 8 periods at 4%. Alternatively: $90,000/$65,763 = 1.3686 This is the present value of 1 factor for 8 periods at 4%. This implies the fund is earning 4%. Feedback: $65,763/$90,000 = 0.7307 42. Answers will vary

This is the future value of 1 factor for 3 periods at 12%. Alternatively: $30,000/$21,354 = 1.4049 This is the present value of 1 factor for 3 periods at 12%. This implies the company must earn 12%. Feedback: $21,354/$30,000 = 0.7118 43. Answers will vary

Feedback: $50,000 x 1.7182 = $85,910

36.

Answers will vary

No, Troy will be $3,965.50 short of his goal of $175,000. Feedback: $105,000 x 1.6289 = 171,034.50 44. Answers will vary Feedback: 47. Answers will vary

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o To donload download ore more ebooks, ebooks, slides, slides, SM and and TB visit: visit: htp:/donloadslide.blogspot.co http://downloadslide.blogspot.com
Feedback: $25,000 x 4.4859 = $1 12, 147.50 48. Answers will vary

Feedback: $9,000 x 6.4632 = $58,168.80 49. Answers will vary

Calculation: $100,000/$14,702 = 6.8017, the present value of 1 annuity factor at 6% for 9 periods. Feedback: Nine years. 50. Answers will vary

This is the present value of an annuity factor at 6% for 10 periods. It will take 10 years to pay off the loan. Feedback: $883,212/$120,000 = 7.3601 51. Answers will vary

Davis is paying a 4% semiannual rate, or 8% annual rate of interest. This is the present value of an annuity factor for 6 periods at 4%. Feedback: $524,210/$100,000 = 5.2421

48.

Answers will vary

Feedback: $15,000 x 15.937 = $239,055 52. Answers will vary

Feedback: $6,000 x 14.487 = $86,922 53. Answers will vary

Feedback: $8,654,000/8.654 = $ 1,000,000 annually 54. Answers will vary

55. 56. 57. 58. 59.

Interest Discount Interest rate (i); Number of time periods (n) Annuity Ordinary

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app B Summary
Category Difficulty: Easy Difficulty: Hard Difficulty: Medium Fundamental - Appendix B... Learning Objective: C1 Describe the earning of interest and the concepts of present and future values. Learning Objective: P1 Apply present value concepts to a single amount by using interest tables. Learning Objective: P2 Apply future value concepts to a single amount by using interest tables. Learning Objective: P3 Apply present value concepts to an annuity by using interest tables. Learning Objective: P4 Apply future value concepts to an annuity by using interest tables. # of Questions 10 17 32 61 5 17 15 16 12