Question

If the minimum required cash is less than the ending cash, a company must borrow money

True / False

The FV of a single amount of $A is equal to A(1+r)n

True / False

An annuity is a series of equal receipts or payments

True / False

If you borrow $10,000 at 8% to be repaid in 4 years, your finance charge for the loan will equal $3200

True / False

In an annuity due, the future value grow by one period less

True / False

Discount rate is also called 'required rate of return'

True / False

If you want to borrow money, your payments must be such that they are equal to the future value of money

True / False

The future value of an annuity due is more than that of an ordinary annuity

True / False

The future value of an annuity due is (1 - (1+r)ⁿ )/r where r is the rate of return and n is the number of periods

True / False

Higher is the discount rate, higher is the present value

True / False

You want to buy a car for cash 4 years from now for a cash price of $25000. To this end you want to make an annuity deposit each year so that you accumulate the required amount. Interest rate is 8%. If deposits are made at the begiining of each period, then your annual payment will be approximately $5548.02

True / False

You want to buy a car for cash 4 years from now for a cash price of $25000. To this end you want to make an annuity deposit each year so that you accumulate the required amount. Interest rate is 8%. In the case of annuity due, your annual payments will be equal to approximately $5137.06

True / False

You borrow $8000 at an annual interest rate of 6% to be repaid in 4 equal annual installments. Your annual payment will be approximately equal to

1. 	a.	2208.73
   	b.	2000
   	c.	2120
   	d.	none of the above

You borrow $8000 at an annual interest rate of 6% to be repaid in 4 equal annual installments. Your total finance charge will be equal to approximately

1. 	a.	480
   	b.	1920
   	c.	1235
   	d.	Not enough information is given to answer the question

You borrow $8000 at an annual interest rate of 6% to be repaid in 4 equal annual installments. Your ending balance at the end of period 2 will be equal to approximately

1. 	a.	2178
   	b.	4133
   	c.	6171
   	d.	none of the above

You borrow $8000 at an annual interest rate of 6% to be repaid in 4 equal annual installments. If you want to repay the who;e loan at the end of period 2, then your payment will be equal to approximately

1. 	a.	4233
   	b.	6171
   	c.	4000
   	d.	none of the above

You invest $2000 per year at the end of each year for 10 years at an interest rate of 9%. The future value of your money will be equal to approximately

1. 	a.	30385.8
   	b.	28000
   	c.	53000.78
   	d.	none of the above

You invest $800 per year at the beginning of each year for 8 years at an interest rate of 8%. The future value of your money will be equal to approximately

1. 	a.	19508
   	b.	8509.28
   	c.	17508
   	d.	none of the above

You invest $800 per year at the beginning of each year for 8 years at an interest rate of 8%. The future value of your money will be equal to approximately

1. 	a.	9190
   	b.	18508
   	c.	18989
   	d.	none of the above

Answer 1

If the minimum required cash is less than the ending cash, a company must borrow money

False

Is the required cash is more, than the money is borrowed

The FV of a single amount of $A is equal to A(1+r)n

TRUE

Future Value = Present value (1+r)ⁿ

An annuity is a series of equal receipts or payments

TRUE

If you borrow $10,000 at 8% to be repaid in 4 years, your finance charge for the loan will equal $3200

Finance Charge = 10,000*8%*4 = $3,200

TRUE

In an annuity due, the future value grow by one period less

FALSE, It grows by one period more

Discount rate is also called 'required rate of return'

TRUE

If you want to borrow money, your payments must be such that they are equal to the future value of money

TRUE

The future value of an annuity due is more than that of an ordinary annuity

TRUE as annuity due grows by one period more

The future value of an annuity due is (1 - (1+r)ⁿ )/r where r is the rate of return and n is the number of periods

False

Higher is the discount rate, higher is the present value

False, Higher the discount rate, lower is the present value

You want to buy a car for cash 4 years from now for a cash price of $25000. To this end you want to make an annuity deposit each year so that you accumulate the required amount. Interest rate is 8%. If deposits are made at the begiining of each period, then your annual payment will be approximately $5548.02

Annual payment = (1.08)*x*[{(1.08)⁴ – 1}/0.08] = 25,000

X = 5,137.06

FALSE

You want to buy a car for cash 4 years from now for a cash price of $25000. To this end you want to make an annuity deposit each year so that you accumulate the required amount. Interest rate is 8%. In the case of annuity due, your annual payments will be equal to approximately $5137.06

In case of annuity due, payments are made at the beginning of each year

Annual payments = $5,137.06

TRUE