11.
Calculate the future value of equal semiannual payments of $9,000 at 12% compounded semiannually for 4 years. The answer is
a.$43,014.
b.$55,888.
c.$89,077.
d.$114,757.
12.Present value is
a. how much today’s money will be worth in the future.
b. the amount of money that must be invested now to produce a known future value.
c. always larger than the future value.
d. the total cost of interest over several years.
13.How much would you deposit today in a savings account that earns 10%, in order that you can make equal annual withdrawals of $1,200 each at the end of each of the next 15 years?
a.$5,013
b.$9,127
c.$19,800
d. $18,000
e.$38,127
14.Miracle Corporation wants to withdraw $60,000 from a savings account at the end of each year for ten years beginning one year from now. The savings earns 10% and is compounded annually. Which one of the following reflects the correct procedure to determine the required initial investment at the beginning of the first year?
a. $60,000 times the present value of a 10-year, 10% ordinary annuity.
b. $60,000 divided by the future value of a 10-year, 10% ordinary annuity.
c. $60,000 times the future value of a 10-year, 10% ordinary annuity.
d. $6,000 divided by the present value of a 10-year, 10% ordinary annuity.
15.An annuity due and an ordinary annuity have equal payments, the same interest rates, and the amount of time between the payments is equal. Which statement is true?
a. The present value of the annuity due is less than the present value of the ordinary annuity.
b. The future value of the annuity due is less than the future value of the ordinary annuity.
c. The future value of the annuity due is equal to the future value of the ordinary annuity.
d. The present value of the annuity due is greater than the present value of the ordinary annuity.
16
.An amount is deposited for five years at 6% and is compounded semi-annually. Which interest rate and periods will be used to determine the present value?
a. 8% for 5 periods
b. 3% for 10 periods
c. 3% for 2.5 periods
d.8% for 10 periods
17.To determine how much must be deposited in the bank today so that you can withdraw 6 annual payments beginning one year from now, which interest factor will you need?
a. Future value of an ordinary annuity of 1
b. Future value of an annuity due of 1
c. Present value of an ordinary annuity of 1
d. Present value of an annuity due of 1
18.On July 1, 2009, Roseland Inc. purchased land for a new manufacturing facility at a price of $750,000. However, the seller is financing the transaction and equal quarterly payments will be made starting today, July 1, 2009. The last semi-annual payment will be made on December 31, 2028. The applicable interest rate is 8%. How much is each semi-annual payment?
a.$35,365
b.$36,435
c.$37,893
d.None of the above
19.Carter Holding Co. intends to purchase a new accounting system, including hardware, software and a complete package of services needed to get the new system up and running. Carter has four options for paying for the new system. Which of the four options is the least costly if the applicable interest rate is 12%?
a.Make a lump sum payment of $100,000 today
b.Make 10 annual payments of $16,000, starting today
c.Make 40 quarterly payments of $4,000, starting today
d.Make one lump sum payment of $150,000 four years from today
20.Jim Hall invested $12,000 at 8% annual interest and left the money invested without withdrawing any of the interest for 15 years. At the end of the 15 years, Jim withdrew the accumulated amount of money. What amount did Jim withdraw, assuming the investment earns compounded interest?
a.$14,400
b.$38,066
c.$26,400
d.$15,783