1 Appendix B 1) Future value is the amount that must be invested today at a specific interest rate to receive a particular amount at some future date.⊚ true ⊚ false
2) The present value of an ordinary annuity is the amount that must be invested today at a specific interest rate to in order to receive a particular amount at the end of a specified number of future periods.⊚ true ⊚ false
3) The future value of an investment gradually increases toward its present value amount.⊚ true ⊚ false
4) Compound interest assumes that the interest earned on a particular investment is reinvested.⊚ true ⊚ false
5) Discounting a future value amount will determine its present value amount.⊚ true ⊚ false
6) The lower the discount rate of an investment, the lower the present value of the investment.⊚ true ⊚ false
7) Annuities provide a series of cash flows to investors at regular intervals for a specified period of time.⊚ true ⊚ false
Test Bank for Financial & Managerial Accounting, 20th Edition by Jan Williams Answers Included 1 / 4
2 8) The market price of a bond is equal to the discounted present value of its future cash flows.⊚ true ⊚ false
9) An ordinary annuity is the discounted present value of a series of cash flows made at the beginning of each of a specified number of periods.⊚ true ⊚ false
10) Interest rate percentages can be expressed in a variety of ways, including monthly, quarterly, semiannually, and annually.⊚ true ⊚ false
11) The difference between a present value and a related future value amount depends on (1) the discount rate and (2) the length of time over which the present value accumulates interest.⊚ true ⊚ false
12) The liability for post-retirement benefits is reported at the discounted present value of anticipated future cash outlays to retired employees in the form of pensions, health insurance premiums, etc.⊚ true ⊚ false
13) As discount rates used to value investments increase, the present values of those investments decreases.⊚ true ⊚ false
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3 14) Present values of future cash flows can only be calculated through the application of complex formulas.⊚ true ⊚ false
15) The future value of an investment’s present value today can be determined by multiplying its present value by the appropriate factor obtained from a future value table.⊚ true ⊚ false
16) The future value of an ordinary annuity can be determined by multiplying the periodic annuity payment by the appropriate factor obtained from a future value of an ordinary annuity table.⊚ true ⊚ false
17) The present value of an investment that promises to pay a single lump-sum amount in the future can be calculated by multiplying the future lump-sum amount by the appropriate factor obtained from a present value of $1 table.⊚ true ⊚ false
18) The present value of an ordinary annuity is calculated by multiplying the annuity’s periodic cash payments by the appropriate factor obtained from a future value of an ordinary annuity table.⊚ true ⊚ false
19) If Larraine invested $33,000 at 6% on her 20th birthday, how much would Larraine have on her 40th birthday?
A) $105,831.00
B) $100,803.28
C) $121,824.94
D) $131,903.58
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4 20) If Larraine invested $24,000 at 5% on her 20th birthday, how much would Larraine have on her 40th birthday?
A) $63,672.00
B) $73,293.60
C) $79,358.28
D) $60,646.83
21) If Jonathan invests $41,000 today for 10 years and it grows to $165,886, what rate of interest has Jonathan received?
A) 10%
B) 30%
C) 15%
D) 20%
22) If Jonathan invests $44,000 today for 6 years and it grows to $69,828, what rate of interest has Jonathan received?
A) 12%
- 6%
- 8%
D) 16%
23) How much must Rashad invest today in order to have $25,200 in 9 years assuming 15% interest compounded annually?
A) $7,156.80
B) $16,800.00
C) $23,066.24
D) $17,842.00
24) How much must Rashad invest today in order to have $15,000 in 8 years assuming 12% interest compounded annually?
A) $6,060.00
B) $10,000.00
C) $19,531.25
D) $11.520.00
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