8 mcqs on time value of money …


(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?


(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?



(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:

(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

(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.
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?


(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?


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