Question : 29.Judy Bright has just won the lottery. She can elect : 1259394

 

 

29.Judy Bright has just won the lottery. She can elect to receive her winnings in equal payments of $200,000 a year for the next ten years on December 31 or to receive $2,000,000 immediately. If the current interest rate is 6%, which choice will provide the highest amount:   

A. Receiving $2,000,000 immediately.

 

B. Taking equal payments for 10 years.

 

C. It does not matter since either choice provides the same amount.

 

D. Refusing to accept the winnings since it is not enough.

 

 

 

30.To determine the present value of a single amount to be received or paid at a future time you need to know all of the following except:   

A. The interest rate or discount rate.

 

B. The number of periods.

 

C. The future value.

 

D. The time between periods.

 

 

 

 

31.To determine the amount to be deposited in a bank today to grow to $5,000 three years from now at 7% which table should be used?   

A. Present value of 1.

 

B. Future value of 1.

 

C. Present value of an annuity.

 

D. No table is required, just multiply $5,000 by 1.07.

 

 

 

 

32.Anthony Driver wants to buy a new car in 4 years. He knows that he can earn 6% interest compounded semi-annually. How much must he deposit now in order to have $26,000 at the end of 4 years?   

A. $21,390.20.

 

B. $20,524.66.

 

C. $38,413.96.

 

D. $31.603.26.

 

 

 

33.Compound interest:   

A. Is interest only on the principal amount for several years.

 

B. Is interest on the principal and previously earned interest.

 

C. Is interest only on previous interest excluding the principal.

 

D. Is equal to simple interest received for several years.

 

 

 

 

34.Financial instruments do not include:   

A. Contracts that call for receipts or payment of cash.

 

B. Equity investment in another business.

 

C. Cash.

 

D. Tangible assets.

 

 

 

 

35.Financial instruments are recorded at:   

A. Future values.

 

B. Present values plus interest.

 

C. Present values less interest.

 

D. Present values.

 

 

 

 

36.A note that does not include an interest rate should be recorded at:   

A. Its face amount if the difference between face and present value is material.

 

B. Its present value if the difference between face and present value is material.

 

C. Its face amount at all times.

 

D. Its present value at all times.

 

 

 

 

37.Joe Notsosmart invested $10,000 at 8% simple interest for 5 years. How much more would he have received if he had received compound interest annually at the same rate?   

A. $4,000.

 

B. $4,693.

 

C. $693.

 

D. $400.

 

 

 

38.The present value of a cash amount:   

A. Is always less than the future value.

 

B. Is always more than the future value.

 

C. Is the same as the future value.

 

D. Is the same as the actual cash value.

 

 

39.If you receive $20,000 as a gift and invest it at 12% compounded quarterly, how much will you have at the end of three years?   

A. $32,020.60.

 

B. $28,515.20.

 

C. $22,497.20.

 

D. $14,027.60.

 

 

 

40.The time value of money is based on the idea that:   

A. The value of money in the future equals the interest received in the present.

 

B. The value of money in the future will be greater than an amount available today.

 

C. The value of money at present over some length of time will be reduced by inflation.

 

D. The future value of money will become the current value as time passes.

 

 

 

 

41.Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?   

A. $1,000.

 

B. $1,105.13.

 

C. $1,077.50.

 

D. $1,082.37.

 

 

 

42.A future amount is the dollar amount to which a present value will ______________ over time.   

A. vanish

 

B. accumulate

 

C. disappear

 

D. remain