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Multiple Choice Quiz
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1
Which of the following is true?
A)A present value is always less than a future amount.
B)A future amount is always greater than a present value.
C)A dollar available at a future date is always worth less than a dollar that is available today.
D)All of the above are true.
2
Future Value of $1 after n Periods:

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If you make a deposit of $10,000 at the beginning of Year 1 and a $10,000 deposit at the beginning of Year 4, what is the future value will you have accumulated at the end of the 8 years at 5% compounded annually?
A)$29,540
B)$26,930
C)$20,000
D)$21,600
3
Future Value of $1 after n Periods:

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Calculate the amount of present value (investment) you would need to deposit at 8% interest compounded annually to have $10,000 at the end of four years.
A)$7,353
B)$13,500
C)$7,937
D)$9,200
4
Future Amount of $1 Paid Periodically for n Periods:

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At the end of four years, how much future value will you have if you make deposits of $10,000 at the end of each year that will earn 6% compounded annually?
A)$43,750
B)$42,400
C)$43,100
D)$31,840
5
When using a table of Future Amount of $1 Paid Periodically for n Periods, the factors are computed on which basis?
A)The first deposit does not earn interest
B)All of the deposits earn interest
C)The periodic deposits are not equal
D)The last deposit does not earn interest
6
Bond issues sometimes require periodic payments to a bond sinking fund, to ensure the principal will be paid at maturity. The annual year-end deposits for a $100,000, 5%, 4-year bond would which of the following?
A)$20,000
B)The present value of an annuity divided by the number of periodic deposits
C)The future amount of an annuity divided by an appropriate factor from a table of Future Amount of $1 Paid Periodically for n Periods
D)$25,000
7
Future Amount of $1 Paid Periodically for n Periods:

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A bond issue requires year-end deposits (sinking fund) that will ensure the payment of the $100,000 principal on 4-year 8% bonds. The deposits will earn 6% compounded annually. Calculate the amount of a periodic deposit.
A)$43,540
B)$22,857
C)$22,193
D)$23,000
8
Present Values of $1 Due in n Periods:

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You are going to inherit $40,000. The conditions of the inheritance are that you must select, today, one of four plans for receiving the $40,000. Assuming a realistic rate of interest (discount rate) of 5%, which plan would you select: Plan A, B, C, or D?
A)Plan A: $20,000 at the end of two years and $20,000 at the end of four years
B)Plan B: $10,000 today and $30,000 at the end of four years
C)Plan C: $15,000 today, $10,000 at the end of three years, and $15,000 at the end of four years
D)Plan D: $30,000 at the end of two years and $10,000 at the end of four years
9
Present Values of $1 to Be Received Periodically for n Periods:

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You are to receive $10,000 at the end of each year for four year. What is the present value of this annuity, assuming a discount rate of 10%?
A)$31,700
B)$36,000
C)$24,870
D)$37,910
10
Present Values of $1 to Be Received Periodically for n Periods:

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In order for you to take four annual year-end withdrawals of $8,000, at a discount rate (your required rate of return) of 5%, the present value of your required investment is which amount?
A)$28,368
B)$21,840
C)$30,400
D)$33,600





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