Tmv Questions
The Time Value of Money – Practive test 1
You have 1 hour 20 minutes to complete the exam. You may use a calculator (not a financial or programmable calculator), cheat sheet with formulae, copies of Financial Tables and scratch paper. Please make sure to write your name on the scantron and on exam. You need to submit both the scantron and exam. Find the best option in the available multiple choice answers. Keep in mind that there may be some rounding errors. Good luck! ____ 1. You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would improve the present value of your cash flows? a. extend the cash flows over a longer period of time b. increase the discount rate c. decrease the discount rate d. extend the cash flows over a longer period of time, and decrease the discount rate 2. The effective rate of interest will always be ____ the nominal rate. a. greater than b. equal to c. less than d. equal to or greater than 3. ____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods. a. basic interest b. simple interest c. future interest d. compound interest 4. More frequent compounding results in ____ future values and ____ present values than less frequent compounding at the same interest rate. a. higher, higher b. lower, higher c. higher, lower d. lower, lower 5. The earnings of Omega Supply Company have grown from $2.00 per share to $4.00 per share over a nine year time period. Determine the compound annual growth rate. a. 11.1% b. 8% c. 22.2% d. 100% 6. Comet Powder Company has purchased a piece of equipment costing $100,000. It is expected to generate a ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return Comet expects to earn from this equipment. a. 16.3% b. 62.7% c. 10% d. 20%
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7. Mr. Moore
You have 1 hour 20 minutes to complete the exam. You may use a calculator (not a financial or programmable calculator), cheat sheet with formulae, copies of Financial Tables and scratch paper. Please make sure to write your name on the scantron and on exam. You need to submit both the scantron and exam. Find the best option in the available multiple choice answers. Keep in mind that there may be some rounding errors. Good luck! ____ 1. You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would improve the present value of your cash flows? a. extend the cash flows over a longer period of time b. increase the discount rate c. decrease the discount rate d. extend the cash flows over a longer period of time, and decrease the discount rate 2. The effective rate of interest will always be ____ the nominal rate. a. greater than b. equal to c. less than d. equal to or greater than 3. ____ is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods. a. basic interest b. simple interest c. future interest d. compound interest 4. More frequent compounding results in ____ future values and ____ present values than less frequent compounding at the same interest rate. a. higher, higher b. lower, higher c. higher, lower d. lower, lower 5. The earnings of Omega Supply Company have grown from $2.00 per share to $4.00 per share over a nine year time period. Determine the compound annual growth rate. a. 11.1% b. 8% c. 22.2% d. 100% 6. Comet Powder Company has purchased a piece of equipment costing $100,000. It is expected to generate a ten-year stream of benefits amounting to $16,273 per year. Determine the rate of return Comet expects to earn from this equipment. a. 16.3% b. 62.7% c. 10% d. 20%
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7. Mr. Moore