Time value of money multiple choice questions and answers

(1) Kristi is considering an investment that will pay $5,000 a year for 7 years, starting one year from today. How much should she pay for this investment if she wishes to earn a 12 percent rate of return?

$17,899.08
$24,507.19
$22,818.78
$18,023.88
$20,186.75

(2) Sue needs to invest $3,626 today in order for her savings account to be worth $5,000 six years from now. Which one of the following terms refers to the $3,626?
Compound value
Complex value
Present value
Factor value
Future value

(3) What is the future value of $4,900 invested for 8 years at 7 percent compounded annually?

$8,419.11
$8,397.74
$8,511.15
$8,520.22
$8,513.06

(4) Todd will be receiving a $10,000 bonus one year from now. The process of determining how much that bonus is worth today is called:
simplifying.
discounting.
extrapolating.
compounding.
aggregating.

(5) Travis is buying a car and will finance it with a loan which requires monthly payments of $265 for the next 4 years. His car payments can be described by which one of the following terms?
Lump sum
Consol
Annuity
Perpetuity
Factor

(6) Computing the present value of a future cash flow to determine what that cash flow is worth today is called:
time valuation.
simple cash flow valuation.
factoring.
compounding.
discounted cash flow valuation.

(7) You are scheduled to receive $7,500 in three years. When you receive it, you will invest it for eight more years at 7.5 percent per year. How much will you have in eleven years?

$15,110.24
$14,428.09
$16,113.33
$13,376.08
$16,617.07

(8) Dressler Engine Tuning just decided to save money each year for the next 4 years to help fund a new building. If it earns 5.5 percent on its savings, how much will the firm have saved at the end of year 4?

$107,525.40
$108,392.69
$111,737.43
$117,882.99
$110,414.14