Chap 6 Quiz

# Chap 6 Quiz - Question 1 Under an ordinary annuity the...

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Question 1 Under an ordinary annuity, the rents occur at the end of each period. True False Q uestion 2 Aarti wants to set aside enough money now to go on vacation in two years. She has developed the following estimates: How much should she deposit today in an account earning 5%, compounded annually, to have sufficient cash on hand to pay for the vacation? \$1,524 \$1,587 \$1,680 \$1,750 Which of the following is not a fundamental variable to all compound interest problems? Interest rate. Market value. Future value. Present value. Question 4 Which of the following investments will result in the largest future amount? One that offers annual compounding. One that offers monthly compounding. One that offers quarterly compounding. One that offers semi-annual compounding. Question 5

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When the future value of an ordinary annuity is computed, the number of compounding periods will always be: equal to the number of rents. greater than the number of rents. less than the number of rents. less than or equal to the number of rents. Question 6 In order to determine how much to deposit now to have \$250,000, 6 years from now, one would use the: future value of 1 table. present value of 1 table. present value of an ordinary annuity of 1 table. present value of an annuity due of 1 table. Ted Allen wants to invest a certain sum of money at the end of each year for three years. The investment will earn 8% compounded annually. At the end of three years, he will need a total of \$625,000 accumulated. How should he compute his required annual investment? \$625,000 times the future value of a 3-year, 8% ordinary annuity of 1 factor. \$625,000 divided by the future value of a 3-year, 8% ordinary annuity of 1 factor. \$625,000 times the present value of a 3-year, 8% ordinary annuity of 1 factor. \$625,000 divided by the present value of a 3-year, 8% ordinary annuity of 1 factor. Question 8 Accounting topics where present value-based accounting measurements are relevant include all of the following except Leases. Long-term assets. Sinking funds. Stockholders' equity. For an investment that earns 5% compounded quarterly for four years, how many compounding periods are there? 4 16 8 2 Question 10 Which of the following is not a variable that is a part of all compound interest problems?
Future value. Interest rate. Present value. Past value. Question 11 Which of the following is true? Rents occur at the beginning of each period in an ordinary annuity. Rents occur at the end of each period in an annuity due. Rents occur at the beginning of each period in an annuity due. Rents occur in the middle of each period in an ordinary annuity. Question 12 Tsai Company, a company who maintains its accounting records using IFRS, manufactures kitchen equipment. Tsai sells a \$75,000 order to Nigella Lawson in exchange for a zero interest- bearing note due from the customer in two years. Since there is no stated interest rate on the note, the controller uses the current market rate of 8% to derive the present value factor. Based on this

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• Spring '14
• CurtisAtchley
• Accounting, Simmons Company

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