Practice Exam Questions from book-Financial
Management
All of the future values are greater than $100 - ✔✔Which of the following will result in a future value of greater
than $100?
PV=$50, r=an annual interest rate of 10%, and n=8years
PV=$75, r=an annual interest rate of 12%, and n=3years
PV=$90, r=an annual interest rate of 14%, and n=1years
No. John has only $9,687 in his home improvement account - ✔✔A home improvement firm has quoted a price of
$9,800 to fix up John's back yard. Five years ago, John put $7,500 into a home improvement account that has
earned an average of 5.25% per year. Does John have enough money in his account to pay for the back yard
fix-up?
$5,654 - ✔✔You have purchased a savings bond that will pay $10,000 to your newborn child in 15 years. If the
bank discounts this bond at a rate of 3.875% per year, what is today's price (present value) for this bond?
Discount - ✔✔To determine the present value of a future amount, one should __ the future cash flows.
PV=FV/(1+r)^n - ✔✔The question "What is the current value of an amount of cash that I will receive at a specific
time in the future?" is best answered by which form of the TVM equation?
r= -4.67% - ✔✔The Millville School District had 3,071 students enrolled five years ago. Today, the district
enrollment is 3,418 students. What has been the annual rate of change of student enrollment in the Millville School
District over this time period?
r= 4.58% - ✔✔Average U.S. wages in 1990 were $28,960, far higher than the average wage in 1930 of $1,970.
What was the average annual increase in wages over this sixty-year period?
n= 60 years - ✔✔For much of the 20th century, new car prices rose at an annual rate of 5.73%. Given a beginning
new car price of $600, how long did it take the average age new car price to rise to $16,950? Round to the nearest
year.
$98,000 - ✔✔Your company just sold a product with the following payment plan: $50,000 today, $25,000 next
year, and $10,000 the following year. If your firm places the payments into an account earning 10% per year, how
much money will be in the account after collecting the last payment?
The grocery bill that changes every week - ✔✔Which of the following is not an example of annuity cash flows?
$3,899.47 - ✔✔You have an annuity of equal annual end of the year cash flows of $500 that begin two years from
today and last for a total of ten cash flows. Using a discount rate of 4%, what are those cash flows worth in today's
dollars?
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