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36. The time value of money refers to the issue of
A) what the value of the stream of future cash flows is today.
B) why a dollar received tomorrow is worth more than a dollar
received today. a
C) why a dollar received tomorrow is worth the same as a dollar
received today.
D) None of the above.
37. Which one of the following statements is NOT true?
A) The time value money refers to what the value of the stream of
future cash flows today is.
B) A dollar received today is worth more than a dollar received
tomorrow. d
C) A dollar received tomorrow is worth less than a dollar received
today.
D) A dollar received today is worth less than a dollar received
tomorrow.
38. Which one of the following statements is NOT true?
A) The value of a dollar invested at a positive interest rate grows
over time.
B) The further in the future you receive a dollar, the less it is worth
today. d
C) A dollar in hand today is worth more than a dollar to be received
in the future.
D) The further in the future you receive a dollar, the more it is worth
today.
39. Future value measures
A) what one or more cash flows are worth at the end of a specified
period.
B) what one or more cash flows that is to be received in the future a
will be worth today.
C) both a and b
D) None of the above
40. Which one of the following statements is true?
A) Individuals prefer to consume goods right away rather than in
the future.
B) Individuals prefer to consume goods in the future rather than a
right away.
C) The time of consumption is irrelevant to individuals.
D) None of the above.
41. The process of converting an amount given at the present time
into a future value is called
A) time value of money.
c
B) discounting.
C) compounding.
D) None of the above.
42. The process of converting future cash flows to what its present
value is
A) time value of money.
b
B) discounting.
C) compounding.
D) none of the above.
43. Which one of the following statements is NOT true?
A) Present value calculations involve bringing a future amount
back to the present.
B) The present value (PV) is often called the discounted value of
d
future cash payments.
C) The present value factor is more commonly called the discount
factor.
D) All of the above are true statements.

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44. Which one of the following statements is NOT true?
A) Present value calculations involve bringing a future amount
back to the present.
B) The future value is often called the discounted value of future
cash payments. b
C) The present value factor is more commonly called the discount
factor.
D) The higher the discount rate, the lower the present value of a
dollar.
45. The Rule of 72
A) can be used to determine the amount of time it takes to double
an investment.
B) is fairly accurate for interest rates between 25 and 50 percent.
a
C) states that the time to double your money (TDM) approximately
equals 72/i, where 72 represents the years it takes to double your
investment.
D) None of the above describe the Rule of 72.
46. Using higher discount rates will
A) not affect the present value of the future cash flow.
B) increase the present value of any future cash flow. c
C) decrease the present value of any future cash flow.
D) None of the above.
47. Using higher interest rates will
A) not affect the future value of the investment.
B) increase the future value of any investment. b
C) decrease the future value of any investment.
D) None of the above.
48. Using lower discount rates will
A) not affect the present value of the future cash flow.
B) increase the present value of any future cash flow. b
C) decrease the present value of any future cash flow.
D) None of the above.
49. Using lower interest rates will
A) decrease the future value of any investment.
B) increase the future value of any investment. a
C) not affect the future value of the investment.
D) None of the above.
50. Your aunt is looking to invest a certain amount today. Which of
the following choices should she opt for?
A) three-year CD at 6.5% annual rate
D
B) three-year CD at 6.75% annual rate
C) three-year CD at 6.25% annual rate
D) three-year CD at 7% annual rate
51. Future value: You are interested in investing $10,000, a gift
from your grandparents, for the next four years in a mutual fund
that will earn an annual return of 8 percent. What will your invest-
ment be worth at the end of four years? (Round to the nearest
dollar.) b
A) $10,800
B) $13,605
C) $13,200
D) None of the above

52. Future value: Ning Gao is planning to buy a house in five years.
She is looking to invest $25,000 today in an index mutual fund that
will provide her a return of 12 percent annually. How much will she
c
have at the end of five years? (Round to the nearest dollar.)
A) $45,000
B) $28,000

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C) $44,059
D) None of the above
53. Future value: Carlos Lopes is looking to invest for the next
three years. He is looking to invest $7,500 today in a bank CD
that will earn interest at 5.75 percent annually. How much will he
have at the end of three years? (Round to the nearest dollar.)
A
A) $8,870
B) $8,000
C) $8,681
D) None of the above
54. Future value: Wes Ottey would like to buy a condo in Florida
in six years. He is looking to invest $75,000 today in a stock that
is expected to earn a return of 18.3 percent annually. How much
will he have at the end of six years? (Round to the nearest dollar.)
a
A) $205,575
B) $157,350
C) $184,681
D) None of the above
55. Future value: Brittany Willis is looking to invest for retirement,
which she hopes will be in 20 years. She is looking to invest
$22,500 today in U.S. Treasury bonds that will earn interest at 6.25
percent annually. How much will she have at the end of 20 years?
(Round to the nearest dollar.) c
A) $68,870
B) $50,625
C) $75,642
D) None of the above
56. Multiple compounding periods (FV): Your brother has asked
you to help him with choosing an investment. He has $5,000 to
invest today for a period of two years. You identify a bank CD that
pays an interest rate of 4.25 percent with the interest being paid
quarterly. What will be the value of the investment in two years? B
A) $5,434
B) $5,441
C) $5,107
D) $5,216
57. Multiple compounding periods (FV): Normandy Textiles had a
cash inflow of $1 million, which it needs for a long-term investment
at the end of one year. It plans to deposit this money in a bank
CD that pays daily interest at 3.75 percent. What will be the value
of the investment at the end of the year? (Round to the nearest
d
dollar.)
A) $1,211,375
B) $1,000,103
C) $1,037,500
D) $1,038,210
58. Multiple compounding periods (FV): Your mother is trying to
choose one of the following bank CDs to deposit $10,000. Which
one will have the highest future value if she plans to invest for
three years?
a
A) 3.5% compounded daily
B) 3.25% compounded monthly
C) 3.4% compounded quarterly
D) 3.75% compounded annually
59. Multiple compounding periods (FV): Carlyn Botti wants to
invest $3,500 today in a money market fund that pays quarterly
interest at 5.5 percent. She plans to fund a scholarship with the
c
proceeds at her alma mater, Towson University. How much will
Carlyn have at the end of seven years? (Round to the nearest
dollar.)
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A) $5,091
B) $3,548
C) $5,130
D) $5,075
60. Multiple compounding periods (FV): Hector Cervantes started
on his first job last year and plans to save for a down payment
on a house in 10 years. He will be able to invest $12,000 today
in a money market account that will pay him an interest of 6.25
percent on a monthly basis. How much will he have at the end of
b
10 years?
A) $12,640
B) $22,383
C) $24,839
D) None of the above
61. Compounding: Trish Harris has deposited $2,500 today in
an account paying 6 percent interest annually. What would be
the simple interest earned on this investment in five years? If
the account paid compound interest, what would be the inter-
est-on-interest in five years? a
A) $750; $95.56
B) $150; $845.56
C) $150; $95.56
D) $95.56; $845.56
62. Compounding: Joachim Noah is investing $5,000 in an ac-
count paying 6.75 percent annually for three years. What is the
interest-on-interest if interest is compounded?
A) $1,012.50 d
B) $1,082.38
C) $82.38
D) $69.88
63. Compounding: Chung Lee wants to invest $3,000 in an ac-
count paying 5.25 percent compounded quarterly. What is the
interest on interest after four years?
A) $695.98 b
B) $65.98
C) $630.00
D) None of the above
64. Compounding: Dat Nguyen is depositing $17,500 in an ac-
count paying an annual interest rate of 8.25 percent compounded
monthly. What is the interest-on-interest after six years?
A) $8,662.50 c
B) $10,925
C) $2,497.63
D) $1,092.48
65. Compounding: Richard Delgado invested $10,000 in a money
market account that will pay 5.75 percent compounded daily. How
much will the interest-on-interest be after two years?
A) $1,218.63 d
B) $1,150.00
C) $33.06
D) $68.63
66. Present value: Tommie Harris is considering an investment
that pays 6.5 percent annually. How much must he invest today
such that he will have $25,000 in seven years? (Round to the
nearest dollar.)
d
A) $23,474
B) $38,850
C) $26,625
D) $16,088

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67. Present value: Jack Robbins is saving for a new car. He needs
to have $ 21,000 for the car in three years. How much will he have
to invest today in an account paying 8 percent annually to achieve
his target? (Round to nearest dollar.)
c
A) $22,680
B) $26,454
C) $16,670
D) $19,444
68. Present value: Derek's friend, Jackson, is asking to borrow
today with a promise to repay $7,418.87 in four years. If Derek
could earn 5.45 percent annually on the any investment he makes
today, how much would he be willing to lend Jackson today?
(Round to nearest dollar.) a
A) $6,000
B) $7,035
C) $6,500
D) $7,150
69. Present value: Becky Sayers wants to buy a house in six years.
She hopes to be able to put down $25,000 at that time. If the bank
CD she wants to invest in will pay 7.5 percent annually, how much
will she have to invest today? (Round to the nearest dollar.)
c
A) $18,472
B) $13,987
C) $16,199
D) $23,256
70. Present value: John Hsu wants to start a business in 10 years.
He hopes to have $100,000 at that time to invest in the business.
To reach his goal, he plans to invest a certain amount today in a
bank CD that will pay him 9.50 percent annually. How much will he
have to invest today to achieve his target? (Round to the nearest
D
dollar.)
A) $54,233
B) $63,837
C) $91,324
D) $40,351
71. Multiple compounding (PV): Rick Rodriquez plans to invest
some money today so that he will receive $7,500 in three years. If
the investment he is considering will pay 3.65 percent compound-
ed daily, how much will he have to invest today?
b
A) $5,276
B) $6,722
C) $6,897
D) $7,140
72. Multiple compounding (PV): You need to have $15,000 in five
years to payoff a home equity loan. You can invest in an account
that pays 5.75 percent compounded quarterly. How much will you
have to invest today to attain your target in five years? (Round to
the nearest dollar.) b
A) $4,903
B) $11,275
C) $14,184
D) $12,250

Multiple compounding (PV): Marcie Witter is saving for her daugh-

ter's college education. She wants to have $50,000 available when
her daughter graduates from high school in four years. If the
investment she is considering will pay 8.25 percent compounded
a
monthly, how much will she have to invest today to reach her
target? (Round to the nearest dollar.)
A) $35,987
B) $49,659
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C) $41,275
D) $36,450
74. Multiple compounding (PV): Darius Miller is seeking to accu-
mulate $50,000 in six years to invest in a real estate venture. He
can earn 6.35 percent annual interest with monthly compounding
in a private investment. How much will he have invest today to
reach his goal? (Round to the nearest dollar.) c
A) $37,527
B) $47,015
C) $34,193
D) $31,648
75. Multiple compounding (PV): Joan Alexander wants to go on
a cruise in three years. She could earn 8.2 percent compounded
monthly in an account if she were to deposit the money today. She
needs to have $10,000 in three years. How much will she have to
deposit today? (Round to the nearest dollar.) b
A) $6,432
B) $7,826
C) $8,148
D) $7,763
76. Interest rate: Your tuition for the coming year is due today. You
borrow $8,000 from your uncle and agree to repay in the three
years an amount of $9,250. What is the interest rate on this loan?
Round to the nearest percent.
a
A) 5%
B) 6%
C) 7%
D) 8%
77. Interest rate: Rachael Steele wants to borrow $6,000 for a
period of four years. She has two choices. Her bank is offering to
lend her the amount at 7.25 percent compounded annually. She
can also borrow from her firm and will have to repay a total of
$8,130.93 at the end of four years. Should Rachael go with her
bank or the firm, and what is the interest rate if she borrows from c
her firm? (Round to the nearest percent.)
A) Bank: 9%
B) Firm: 7%
C) Bank: 8%
D) Firm: 6%
78. Interest rate: Ray Seo has $5,000 to invest in a small business
venture. His partner has promised to pay him back $8,200 in five
years. What is the return earned on this investment?
A) 9.3% d
B) 8.7%
C) 11.1%
D) 10.4%
79. Interest rate: Pedro Martinez wants to invest $25,000 in a spa
that his sister is starting. He will triple his investment in six years.
What is the rate of return that Pedro is being promised? (Rounded
to the nearest percent.)
b
A) 18%
B) 20%
C) 12%
D) 25%
80. Interest rate: Trayne Rice has $3,000 to invest for three years.
He wants to receive $5,000 at the end of the three years. What
invest rate would his investment have to earn to achieve his goal?
a
(Round to the nearest percent.)
A) 19%
B) 21%
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C) 13%
D) 16%
81. Growth rate: Trojan Traps manufactures an innovative mouse
trap. Sales this year are $325,000. The company expects its sales
to go up to $500,000 in five years. What is the expected growth
rate in sales for this firm? (Round to the nearest percent.)
a
A) 9%
B) 11%
C) 6%
D) 12%
82. Growth rate: Petry Corp. is a growing company with sales of
$1.25 million this year. The firm expects to grow at an annual rate
of 25 percent for the next three years, followed by a growth of 20
percent per year for the next two years. What will be Petry's sales
at the end of five years? (Round to the nearest percent.) b
A) $2,160,000
B) $3,515,625
C) $1,875,000
D) $2,929,688
83. Growth rate: Cleargen, a detergent manufacturer, has an-
nounced this year's net income as $832,500. It expects its net
earnings to grow at a rate of 15 percent per year for the next two
years, before dropping to 12 percent for each of the following two
years. What is the firm's net income after four years? (Round to
a
the nearest dollar.)
A) $1,381,071
B) $1,266,128
C) $1,233,099
D) $1,072,260
84. Growth rate: Peterson Electrical Supplies has generated a net
income of $161,424 this year. The firm expects to see an annual
growth of 30 percent for the next five years, followed by a growth
rate of 15 percent for each of the next three years. What will be the
firm's expected net income in eight years? (Round to the nearest
c
dollar.)
A) $319,157
B) $241,329
C) $911,546
D) $689,259
85. Growth rate: Vidmar Agencies is a fast-growing advertising
agency. Currently, their sales are at $700,000. They expect their
sales to grow at an annual rate of 35 percent in the next two years,
followed by an annual rate of 25 percent in years 3 through 7.
Finally, their growth rate would slow down to 10 percent in years
8-10. What will be their sales as of year 10? (Round to the nearest d
dollar.)
A) $1,698,023
B) $2,843,323
C) $3,893,280
D) $5,181,956
86. Time to attain goal: Your uncle is looking to double his in-
vestment of $10,000. He claims he can get earn 14 percent on
his investment. How long will it be before he can double his
investment? Use the Rule of 72 and round to the nearest year.
a
A) 5 years
B) 14 years
C) 10 years
D) None of the above
87. Time to attain goal: Elegant Designers have generated sales
of $625,000 for the current year. If they can grow their sales at a
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rate of 12 percent every year, how long will they take to triple their
sales? (Round off to the nearest year.)
A) 8 years
c
B) 7 years
C) 10 years
D) 9 years
88. Time to attain goal: Franklin Foods announced that its sales
were $1,233,450 this year. The company forecasts a growth rate
of 16 percent for the foreseeable future. How long will it take the
firm to produce earnings of $3 million? (Round off to the nearest
year.) b
A) 7 years
B) 6 years
C) 8 years
D) 10 years
89. Time to attain goal: Ryan Holmes wants to deposit $4,500 in
a bank account that pays 8.25 percent annually. How many years
will it take for his investment to grow to $10,000? (Round off to the
nearest year.)
c
A) 8 years
B) 11 years
C) 10 years
D) 12 years
90. Time to attain goal: Cheryl Merriweather wants to invest in a
bank CD that will pay her 7.8 percent annually. If she is investing
$11,500 today, when will she reach her goal of $15,000? (Round
off to the nearest year.)
D
A) 5 years
B) 7 years
C) 2 years
D) 4 years
91. Which of the following statements is true?
A) A dollar received today is worth more than a dollar to be
received in the future because future dollars are not affected by
inflation.
B) A dollar to be received in the future is worth more than a dollar
received today because of the positive impact of rates of return. c
C) A dollar received today is worth more than a dollar to be re-
ceived in the future because funds received today can be invested
to earn a return.
D) A dollar to be received in the future is worth more than a dollar
received today because it would have less risk associated with it.
92. Which of the following statements is true?
A) The longer the time period that funds are invested, the greater
the future value, regardless of investment rate.
B) The lower the discount rate that funds are invested at, the
greater the future value. a
C) The shorter the time period that funds are invested, the greater
the future value, regardless of investment rate.
D) The higher the interest rate, the slower the value of an invest-
ment will grow.
93. Future Value: Herbert Hall just received an inheritance of
$35,775 from his great aunt. He plans to invest the funds for
retirement. If Herbert can earn 4.75% per year with quarterly
compounding for 32 years, how much will he have accumulated?
(Round off to the nearest dollar.) d
A) $237,416
B) $ 71,550
C) $184,622
D) $162,113

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94. Which of the following statements is false with respect to the
present value of a future amount?
A) The higher the discount rate, the lower the present value of a
single sum for a given time period.
B) The relation between present value and time is exponential. c
C) The greater the time period, the lower the present value of a
single sum for a given interest rate.
D) The lower the discount rate, the lower the present value of a
single sum for a given time period.
95. Present Value: Juan and Carla Herman plan to buy a
time-share in six years in the amount of $16,860. In order to have
adequate funds to do so, the Herman's want to make a deposit
to their money market fund today. Assume that they will be able
to earn an investment rate of 5.75%, compounded annually. How
much will Juan and Carla need to deposit today to achieve their c
goal? (Round off to the nearest dollar.)
A) $19,138
B) $ 8,885
C) $12,055
D) $14,243
96. Number of Periods it Takes an Investment to Grow a Certain
Amount: Sally Wilson is planning her retirement. She is presently
investing in a 401(k) but needs an additional $500,000 to reach
her retirement goal. As luck would have it, Sally just won a brand
new car that is worth $36,000 in a raffle. If Sally were to sell the car
and invest the $36,000 proceeds at a rate of 6.50%, compounded
b
annually, how long will it be before Sally could retire? (Round off
to the nearest 1/10 of a year)
A) 36.6 years
B) 41.8 years
C) 52.2 years
D) 24.0 years
97. Rate of growth: Link Net, Inc. just generated earnings per
share of $3.75 for the fiscal year ending September 30, 2010. The
firm is expected to achieve earnings per share of $8.76 in 5-years.
At what rate will Link Net, Inc.'s earnings per share be growing
over this 5-year period? (Round off to the nearest 1/10 percent) c
A) 15.7%
B) 18.5%
C) 21.3%
D) 13.4%

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