MGMT 540 Quiz 1

MGMT 540 Quiz 1 - Multiple choice questions for Ch 6 MGMT...

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Multiple choice questions for Ch. 6 MGMT 540 1. . A series of equal receipts at equal intervals of time when each receipt is received at the beginning of each time period is called an a. ordinary annuity. b. annuity in arrears. c. annuity due. d. unearned receipt. 2. . In the time diagram below, which concept is being depicted? 0 1 $1 2 $1 3 $1 4 $1 PV a. Present value of an ordinary annuity b. Present value of an annuity due c. Future value of an ordinary annuity d. Future value of an annuity due P 3. On December 1, 2010, Richards Company sold some machinery to Fleming Company. The two companies entered into an installment sales contract at a predetermined interest rate. The contract required four equal annual payments with the first payment due on December 1, 2010, the date of the sale. What present value concept is appropriate for this situation? a. Future amount of an annuity for four periods b. Future amount of a lump sum for four periods c. Present value of an ordinary annuity for four periods d. Present value of an annuity due for four periods. 4 An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the correct interest rate and nper are a. 8% for eight periods. b. 2% for eight periods. c. 8% for 32 periods. d. 2% for 32 periods. 5. Present value is a. the value now of a future amount. b. the amount that must be invested now to produce a known future value. c. always smaller than the future value. d. all of these.
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6. Which of the following statements is true? a. The higher the discount rate, the higher the present value. b. The process of accumulating interest on interest is referred to as discounting. c. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today. d. If a single sum is due on December 31, 2010, the present value of that sum decreases as the date draws closer to December 31, 2010. 7. What is the primary difference between an ordinary annuity and an annuity due? a. The timing of the periodic payment. b. The interest rate. c. Annuity due only relates to present values. d. Ordinary annuity only relates to present values. 8.. Peter invests $100,000 in a 3-year certificate of deposit earning 3.5% at his local bank. Which time value concept would be used to determine the maturity value of the certificate? a. Present value of one. b. Future value of one. c. Present value of an annuity due. d. Future value of an ordinary annuity. 9. Jerry recently was offered a position with a major accounting firm. The firm offered Jerry either a signing bonus of $23,000 payable on the first day of work or a signing bonus of $26,000 payable after one year of employment. Assuming that the relevant interest rate is 10%, which option should Jerry choose? a.
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MGMT 540 Quiz 1 - Multiple choice questions for Ch 6 MGMT...

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