Chapter 5 Quiz

Chapter 5 Quiz - Chapter 5 Quiz 1) Forty years ago, your...

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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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Chapter 5 Quiz - Chapter 5 Quiz 1) Forty years ago, your...

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