# 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?

\$17,899.08
\$24,507.19
\$22,818.78
\$18,023.88
\$20,186.75

(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?

\$8,419.11
\$8,397.74
\$8,511.15
\$8,520.22
\$8,513.06

(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:
simplifying.
discounting.
extrapolating.
compounding.
aggregating.

(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
Consol
Annuity
Perpetuity
Factor

(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.
factoring.
compounding.
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?

\$15,110.24
\$14,428.09
\$16,113.33
\$13,376.08
\$16,617.07

(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?

\$107,525.40
\$108,392.69
\$111,737.43
\$117,882.99
\$110,414.14