 |
1 | |
Present Value is defined as: |
| | A) | Future cash flows discounted to the present at an appropriate discount rate |
| | B) | Inverse of future cash flows |
| | C) | Present cash flow compounded into the future |
| | D) | None of the above |
|
|
2 | |
If the interest rate is 15%, what is the two-year discount factor? |
| | A) | 0.7561 |
| | B) | 0.8697 |
| | C) | 1.3225 |
| | D) | 0.658 |
|
|
3 | |
An annuity is defined as |
| | A) | Equal cash flows at equal intervals of time forever |
| | B) | An asset that pays a fixed sum for a specified period of time |
| | C) | Unequal cash flows at equal intervals of time forever |
| | D) | None of the above |
|
|
4 | |
If the present value of the cash flow X is $200, and the present value cash flow Y $150, then the present value of the combined cash flow is: |
| | A) | $200 |
| | B) | $150 |
| | C) | $50 |
| | D) | $350 |
|
|
5 | |
What is the net present value of the following cash flow at a discount rate of 15%? | 1. T=0 | t=1 | t=2 | | 2. –120,000 | –100,000 | 300,000 |
|
| | A) | $19,887 |
| | B) | $80,000 |
| | C) | $26,300 |
| | D) | None of the above |
|
|
6 | |
You would like to have enough money saved to receive a $100,000 per year perpetuity after retirement so you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume the perpetuity payments start one year from the date of your retirement. The interest rate is 10%)? |
| | A) | $1,000,000 |
| | B) | $10,000,000 |
| | C) | $100,000 |
| | D) | None of the above |
|
|
7 | |
What is the present value annuity due factor of $1.00 at a discount rate of 15% for 15 years? |
| | A) | 5.8474 |
| | B) | 8.5143 |
| | C) | 7.1324 |
| | D) | 6.7245 |
|
|
8 | |
If the present value of $1.00 received n years from today at an interest rate of r is 0.270, then what is the future value of $1.00 invested today at an interest rate of r% for n years? |
| | A) | $1.00 |
| | B) | $3.70 |
| | C) | $1.70 |
| | D) | $3.95 |
|
|
9 | |
What is the present value of an annuity of $3.40 that is received in one year if the discount rate is 14% and the annuity is expected to grow at 3% in perpetuity? |
| | A) | $3.40 |
| | B) | $24.29 |
| | C) | $30.91 |
| | D) | $113.33 |
|
|
10 | |
Mr. Hopper is expected to retire in 28 years and he wishes to accumulate $750,000 in his retirement fund by that time. If the interest rate is 10% per year, how much should Mr. Hopper put into the retirement fund at the end of each year in order to achieve this goal? |
| | A) | $4,559.44 |
| | B) | $5,588.26 |
| | C) | $9,118.88 |
| | D) | $10,018.67 |
|
|
11 | |
John House has taken a $150,000 mortgage on his house at an interest rate of 6% per year. If the mortgage calls for 30 equal annual payments, what is the amount of each payment? |
| | A) | $14,158.94 |
| | B) | $10,897.34 |
| | C) | $16,882.43 |
| | D) | $17,657.35 |
|
|
12 | |
The concept of compound interest refers to: |
| | A) | Earning interest on the principal |
| | B) | Earning interest on previously earned interest |
| | C) | Investing for a number of years |
| | D) | None of the above |
|
|
13 | |
If you invest $100 at 13% APR for three years, how much would you have at the end of three years using simple interest? |
| | A) | $139.00 |
| | B) | $144.28 |
| | C) | $240.18 |
| | D) | $292.12 |
|
|
14 | |
An investment at 12% nominal rate compounded monthly is equal to an annual rate of: |
| | A) | 12.68% |
| | B) | 12.36% |
| | C) | 12% |
| | D) | None of the above |
|
|
15 | |
A five-year bond with an annual payment of $60 reinvested and compounded at a rate of 8% on a face value of $1,000 will be worth how much at the end of the bond's life? |
| | A) | $60 |
| | B) | $80 |
| | C) | $1,000 |
| | D) | $1,352 |
|
|
16 | |
The nominal cash flow generated by a project is $1,300 next year. What is the real cash flow given a 3% forecasted inflation rate? |
| | A) | $1,085 |
| | B) | $1,186 |
| | C) | $1,262 |
| | D) | $1,300 |
|
|
17 | |
The real cash flow generated by a project is $985 in two years. What is the nominal cash flow given a 5% annual forecasted inflation rate? |
| | A) | $1,085 |
| | B) | $1,186 |
| | C) | $1,262 |
| | D) | $1,300 |
|
|
18 | |
What is the value of $250 invested for one year at a continuously compounded annual rate of 6.5%? |
| | A) | $266.25 |
| | B) | $273.54 |
| | C) | $234.74 |
| | D) | $234.27 |
|
|
19 | |
What is the continuously compounded discount factor for one year at 4.55%? |
| | A) | 0.985 |
| | B) | 1.046 |
| | C) | 0.956 |
| | D) | 1.045 |
|
|
20 | |
What is the continuously compounded discount factor for two years at 11.0%? |
| | A) | 0.8025 |
| | B) | 0.8116 |
| | C) | 1.2321 |
| | D) | 1.2461 |
|
|
21 | |
What is the monthly mortgage payment on a $150,000 mortgage for 30 years at an APR 5.85%? |
| | A) | $784.71 |
| | B) | $805.65 |
| | C) | $884.91 |
| | D) | $925.64 |
|
|
22 | |
The present value of a $2.50 dividend received at the end of this year that grows at 4% forever given a cost of capital of 12% is worth how much today? |
| | A) | $20.83 |
| | B) | $62.50 |
| | C) | $54.23 |
| | D) | $31.25 |
|