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Chapter 5 Quiz
1)
Forty years ago, your mother invested $5,000. Today, that investment is worth
$430,065.11. What is the average annual rate of return she earned on this
investment?
Answer
11.68 percent
11.71 percent
11.78 percent
11.91 percent
12.02 percent
2)
Imprudential, Inc. has an unfunded pension liability of $850 million that must be paid in 25
years. To assess the value of the firm's stock, financial analysts want to discount this liability
back to the present. The relevant discount rate is 6.5 percent. What is the present value of this
liability?
Answer
$159,803,162
$171,438,907
$176,067,311
$184,519,484
$191,511,367
Question 3
1.
What is the relationship between present value and future value interest factors?
Answer
The present value and future value factors are equal to each other.
The present value factor is the exponent of the future value factor.
The future value factor is the exponent of the present value factor.
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 Spring '08
 MILES,JAMESALAN
 Financial Markets

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