Chapter 08 MC

# Chapter 08 MC - CHAPTER EIGHT Multiple Choice Questions...

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CHAPTER EIGHT Multiple Choice Questions 8-1. You deposit \$10,000 in a bank and plan to keep it there for five years. The bank pays 8% annual interest compounded continuously. Calculate the future value at the end of five years. a. \$14,693 b. \$15,000 c. \$14,918 d. \$14,500 8-2. An annuity is best defined as: a. a series of payments for a specified period of time b. any series of payments c. a series of equal payments for a specified number of years d. a series of equal payments occurring at equal intervals for a specified number of periods 8-3. As the discount rate increases, the present value of a positive cash flow to be received at a particular time in the future: a. gets closer to zero b. gets larger without limit c. stays unchanged d. gets smaller without limit 8-4. As the discount rate decreases (including negative values), the present value of a positive cash flow to be received at a particular time in the future: a. gets closer to zero b. gets larger without limit c. stays unchanged d. gets smaller without limit 8-5. Company XYZ purchased some machinery and gave a five-year note with a maturity value of \$20,000. The discount rate is 8% annually and the interest is discounted monthly. How much did the company borrow? a. \$13,612 b. \$13,424 c. \$19,346 d. \$12,000 91

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8-6. What is the present value of an annual annuity payment of \$7,000 made for 12 years with a required return of 5% with the first payment starting today? a. \$ 3,898 b. \$65,145 c. \$62,043 d. \$11,200 8-7. What is the present value of a semi-annual ordinary annuity payment of \$7,000 made for 12 years with a required annual return of 5%? a. \$ 65,145 b. \$128,325 c. \$125,195 d. \$ 62,043 8-8. How long will it take \$10,000 to reach \$50,000 if it earns 10% interest compounded semiannually? a. 17 years b. 33 years c. 16.5 years d. 8.5 years 8-9. You get a twenty-year amortized loan of \$100,000 with a 5% annual interest rate. What are the annual payments? a.
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## This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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Chapter 08 MC - CHAPTER EIGHT Multiple Choice Questions...

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