11) The future value of 1 will always be:
A) equal to 1.
B) greater than 1.
C) less than 1.
D) equal to the interest rate.
12) In present value calculations, the process of determining the present value of a single sum of money is called:
A) allocating.
B) pricing.
C) negotiating.
D) discounting.
13) A single amount of $5,000 is to be received in 3 years. If the single amount is discounted at 6% for 3 periods, the present value is ________. The present value of one for 3 periods at 6% is 0.84. The present value of an ordinary annuity of one for 3 periods at 6% is 2.673.
A) $4,200.
B) $4,450.
C) $5,000.
D) $13,365.
14) Which of the following discount rates will produce the smallest present value of a single sum of money?
A) 4%
B) 6%
C) 7%
D) 9%
15) Cooper Company has purchased equipment that requires annual payments of $20,000 to be paid at the end of each of the next 6 years. The discount rate is 12%. The present value of one for six periods at 12% is 0.507. The present value of an ordinary annuity of one for six periods at 12% is 4.111. What amount will be assigned to the equipment?
A) $60,840
B) $82,220
C) $110,515
D) $120,000
16) On January 1, 2014, bonds with a face value of $100,000 were sold. The bonds mature on January 1, 2024. The stated rate of interest is 8%. The bonds pay interest semiannually on July 1 and January 1. The market rate of interest is 10%. What is the market price of the bonds? The present value of 1 for 20 periods at 5% is 0.377. The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462. The present value of 1 for 20 periods at 4% is 0.456. The present value of an ordinary annuity of $1 for 20 periods at 4% is 13.59.
A) $87,548
B) $92,346
C) $99,960
D) $100,000
17) On January 1, 2014, bonds with a face value of $100,000 were sold. The bonds mature on January 1, 2024. The stated rate of interest is 9% annually. The bonds pay interest semiannually on July 1 and January 1. The market rate of interest is 10% annually. What is the market price of the bonds? The present value of 1 for 20 periods at 5% is 0.377. The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462. The present value of 1 for 10 periods at 10% is 0.386. The present value of an ordinary annuity of $1 for 10 periods at 10% is 6.145.
A) $93,779
B) $93,905
C) $100,000
D) $102,000