Answers to Ch6 Part1 - Questions and Problems

Answers to Ch6 Part1 - Questions and Problems - Multiple...

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Unformatted text preview: Multiple Choice, Question 22 Correct. What best describes the time value of money? An investment in a checking account. The relationship between time and money. The interest rate charged on a loan. Accounts receivable that are determined uncollectible. Multiple Choice, Question 23 Correct. Which of the following situations does NOT base an accounting measure on present values? Sinking funds. Pensions. Prepaid insurance. Leases. Multiple Choice, Question 26 Correct. If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year? Daily. Annually. Monthly. Quarterly. Answer Which factor would be greater - the present value of $1 for 10 periods at 8% per period or the future value of $1 for 10 periods at 8% per period? Need more information. Present value of $1 for 10 periods at 8% per period. The factors are the same. Future value of $1 for 10 periods at 8% per period Multiple Choice, Question 28 Correct. Which of the following tables would show the smallest value for an interest rate of 5% for six periods? Future value of 1. Present value of 1. Future value of an ordinary annuity of 1. Present value of an ordinary annuity of 1. E6-1 Correct. (Using Interest Tables) For each of the following cases, indicate (a) to what rate columns, and (b) to what number of periods you would refer in looking up the interest factor. 1. In a future value of 1 table Annual Rate Number of Years Invested Compounded (a) Rate of Interest (b) Number of Periods a. 9% 9 Annually 9 % 9 b. 8% 5 Quarterly 2 % 20 c. 10% 15 Semiannually 5 % 30 2. In a present value of an annuity of 1 table Annual Rate Number of Years Involved Number of Rents Involved Frequency of Rents (a) Rate of Interest (b) Number of Periods a. 9% 25 25 Annually 9 % 25 b. 8% 15 30 Semiannually 4 % 30 c. 12% 7 28 Quarterly 3 % 28 Click here if you would like to Show Work for this question BE6-3 Correct. Candice Willis will invest $30,000 today. She needs $150,000 in 21 years. What annual interest rate must she earn? (Hint: Use tables in text.) Interest rate 8 % BE6-4 Correct. Bo Newman will invest $10,000 today in a fund that earns 5% annual interest. How many years will it take for the fund to grow to $17,100? (Hint: Use tables in text.) Years 11 Click here if you would like to Show BE6-6 Correct....
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Answers to Ch6 Part1 - Questions and Problems - Multiple...

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