ACCT 301 Smartbook Chapter 5 Time Value of Money Concepts solutions complete answers

ACCT 301 Smartbook Chapter 5 Time Value of Money Concepts solutions complete answers 

 

The               of money concept means that money invested today will grow to a larger amount in the future. (Enter one word per blank.)

 

Jim borrows $1,000 and has to repay $1,100 at the end of the year. The $100 payment is referred to as       . (Enter only one word.)

 

Over a 5-year period, simple interest is ______ compound interest on the same note.

 

On January 1, Susan signs a 1-year note payable for $1000 with 5% simple interest. The simple interest paid on this loan at year-end is $      . (Input only the whole amount of interest.)

 

The initial investment multiplied by the applicable interest rate and multiplied again by the period of time for which the money is used is referred to as        interest. (Enter only one word.)

 

Which concept means that money can be invested today to earn interest and grow to a larger amount in the future?

 

The type of interest that includes interest on the initial investment plus interest on the accumulated interest in previous periods is referred to as        interest. (Enter only one word.)

 

The amount paid for the use of money for some period of time is referred to as       . (Enter one word per blank)

 

The amount of money that a dollar will grow to at some point in the future is known as the


       interest is calculated by multiplying an initial investment times the applicable interest rate and the period of time the money is used, whereas        interest involves earning interest on the interest. (Enter one word per blank.)

 

$1,000 invested today at 10% compounded annually will grow to $1,210 at the end of two years. What is the $1,210 value referred to as?

 

On January 1, McLean Corp. borrowed $50,000 with 8% simple interest. What is the amount of interest that must be repaid at year-end?

 

On January 1, Gino signs a note payable for $10,000. The note has an interest rate of 3%. If Gino repays $10,300 at the end of year 1, the interest is ______ interest.

 

Which of the following formulas represent the present value?

 

Which of the following results in increasingly larger amounts of interest for each period of the investment?

 

Which of the following are required to compute the present value of a known future amount? (Select all that apply.)

 

Joshua would like to deposit $12,000 in a savings account today. He is interested in knowing what that investment will be worth when he retires at age 62. Joshua is interested in calculating what amount?

 

$1,000 invested today at 10% compounded annually will grow to $1,100 at the end of one year or $1,210 at the end of two years. What is the initial $1,000 referred to as?

 

First County Bank loans $100,000 to a customer. At the end of the year, the customer is required to repay the $100,000 loan with 8% interest. What is the amount of interest First County Bank earns on this loan?

 

The formula "future value divided by the quantity (1 + i)n" is the formula for        value. (Enter only one word.)

 

Most monetary assets are valued at the        of        cash flows. (Enter one word per blank.)

 

To solve for the present value of a single sum, you need to know the future value, the number of compounding periods, and the              .

 

Which of the following are monetary liabilities? (Select all that apply.)

 

Alex would like to deposit $1,000 in the bank today and would like to know what that will grow to in 5 years. Alex needs to compute the        value of the money. (Enter only one word.)

 

Karr Company borrowed $100,000 by signing a 5-year note payable at 8% interest. At the end of year 5, Karr will repay the bank $146,933. At the time the note is signed, the $100,000 is referred to as the ______ of the note payable.

 

We value most receivables and payables at the        of        cash flows, reflecting an appropriate time value of money. (Enter one word per blank.)

 

Money and claims to receive money in amounts that are fixed or determinable are called

 

A fixed payment at fixed intervals is called a(n)

 

Which of the following is not a monetary liability?

 

The future value of an ordinary annuity table is used when calculating

 

Milo decides to invest $1,500 in a savings account every year at the beginning of the year for 10 years. Assuming an interest rate of 7%, how much will Milo have at the end of the 10th year? (Round your answer to the nearest dollar.)

 

Sam expects to receive $2,000 at the end of each year for 3 years. The annuity has an interest rate of 12%. The present value of this annuity at Time Zero, the inception of the annuity (rounded to the nearest dollar) is

 

How are most monetary assets and liabilities valued?

 

Match each abbreviation on a financial calculator to its function.

 

A(n)        is a series of equal payments received or paid at equal intervals. (Enter only one word.)

 

Assume you borrow $10,000 from the bank and promise to repay the amount in 5 equal installments beginning one year from today. The stated interest rate on the loan is 5%. What is the unknown variable in this problem?

 

Which of the following situations would involve the calculation of the future value of an ordinary annuity?

 

Which of the following accounts uses time value of money concepts to value the account?

 

George will deposit $2,000 in a savings account at the beginning of each year for 8 years. Assuming the interest rate is 5%, how much money will George have in the account at the end of year 8? Round your answer to the nearest dollar.

 

True or false: At the date of issue, the stated rate of interest on the bond is always equal to the market rate of interest on the bond.

 

Jean expects to receive $5,000 at the end of each year for 4 years. The annuity has an interest rate of 7%. The present value of this annuity at Time Zero, the inception of the annuity (rounded to the nearest dollar) is

 

True or false: A lease is an annuity when it requires equal payments at the same interval.

 

On a financial calculator, the PMT key is used to input the

 

True or false: Present value calculations are used in calculating pension contributions for defined benefit plans.

 

Which of the following are the four variables in present value annuity problems?

 

The amount of money that a dollar will grow to at some point in the future is the

 

The rate of interest printed on the face of a bond is referred to as the        interest rate. (Enter one word per blank)

 

The amount of money today that is equivalent to a given amount to be received or paid in the future is the

 

Jenson rents equipment by signing a contract to pay $1,000 per month at the beginning of each month. The first payment is due upon signing the contract. The lease is a(n)

 

Valuing defined benefit pension obligation typically requires the calculation of the present value of a             .

 

The formula FV = $1(1+i)n is used to calculate

 

Harold would like to deposit a sum of money today that will grow to $20,000 in year 8. Which table should Harold use when making this calculation?

 

The formula PV = $1(1+i)n$1(1+i)n is the formula used to calculate the

 

 

Cindy would like to deposit enough money in a savings account to have $10,000 at the end of year 4. Assuming the investment will earn 5% compounded annually, what amount should Cindy deposit in the savings account today? Round your answer to the nearest dollar.                  

The       interest rate is the amount at which money will actually grow per year with compounding interest.             

James would like to deposit enough money in a savings account to have $8,000 at the end of year 3. Assuming the investment will earn 5% compounded annually, what amount should James deposit in the savings account today? Round your answer to the nearest dollar.                  

Karel sells goods to customers in exchange for a $100,000 noninterest-bearing note due in 2 years. The interest rate on this type of loan is 8%. What is the present value of the note?                

An obligation to pay amounts of cash, the amount which is fixed or determinable, is called a            

Polly sells goods to customers in exchange for a $10,000 noninterest-bearing note due in 3 years. The interest rate on this type of loan is 6%. What is the present value of the note? Round your answer to the nearest dollar.              

The rate at which money actually grows during a year is called the ______ rate.          

Simple interest is computed by multiplying what?                

True or false: The formula to calculate future value 2 years in the future is the amount invested times the interest rate.              

What is the formula for future value?             

What is the formula to calculate future value of an amount “I”?          

Which of the following is an example of a monetary asset?               

          Which of the following is the correct formula to calculate future value?          

 

 

Brooke signs a contract to rent a car for 3 years. The first payment is due at the end of the first month after signing the agreement. This type of annuity is an                 

Carol expects to receive $1,000 at the end of each year for 5 years. The annuity has an interest rate of 10%. The present value of this annuity at Time Zero, the inception of the annuity (rounded to the nearest dollar) is                 

The first cash flow of an ordinary annuity occurs when?                   

The formula FV = $1(1+i)^n is used to calculate                  

The future value of a series of equal-sized cash flows with the first payment taking place at the end of the first period is a               

Jerry Corp. wishes to deposit $10,000 in the bank at the end of each year, and would like to know how much money it will have at the end of year 10. Which table should Jerry use to make this calculation?                 

Lewis Company wishes to deposit $8,000 in the bank at the end of each year, and would like to know how much money it will have at the end of year 10. Which table should Lewis use to make this calculation?                 

The price of a bond includes             

The _____ rate of interest on a bond is the interest rate printed on the bond; the ______ rate of interest is the current rate of interest being paid on investments with similar characteristics.            

A series of payments in the same amount is referred to as               

Sharon receives $100 at the end of each month for 5 years. The type of annuity she is receiving is called a(n)           

Today, the value of a series of equal-sized cash flows with the first payment taking place at the end of the first compounding period is the               

To determine the price of bonds, we add the _____ value of the interest payments and the _____ value of the lump-sum payment paid at maturity.           

True or false: When pricing a bond, the present value of the annuity of the coupon payments is added to the present value of the maturity value of the bond.                   

 

 

Alex invested $10,000 in a savings account for 4 years at 10% compounded annually. What is the future value of Alex’s investment?                

The amount of money paid or received in excess of the amount of money borrowed or lent is referred to as what?                   

A(n) _______ is a series of equal payment received or paid at equal intervals              

Assuming an interest rate of 12% with quarterly compounding, what is the interest rate per compounding period?                   

A bond will be issued at a premium when the market rate of interest is ________ the stated rate                   

The difference between $100 invested now and $105 at the end of year 1 represents the                 

The first cash flow of an ordinary annuity occurs when?                   

If the market rate of interest is lower than the stated rate of interest on a bond at the date of the issuance, the bond will be issued at a                

Interest is typically stated as a(n) ________ rate regardless of the compounding period involved           

Interest on the initial investment plus interest calculated on the previously earned interest is called _______ interest                   

Joe has an annuity due wherin he receives a payment of $8,000 per year for 10 years. The last payment will be received                   

Lenny borrowed $10,000 on a 5-year interest bearing note with an interest rate of 10%. At the end of 5 years, Lenny must repay the bank $16,105. Based on the amount that must be repaid, interest was calculated with what type of interest rate?             

Multiplying an initial investment time both the applicable interest rate and the period of time for which the money is used is referred to as what?           

On January 1, Biggs Corp. borrowed $20,000 wih 4% simple interest. What is the amount of interest that must be paid at year-end?                 

The price of a bond includes             

The rate at which money actually grows during a year is called the ______ rate           

The rate at which money will actually grow during a full year is referred to as the                

The ______ rate of interest on a bond is the interest rate printed on the bond; the _________ rate of interest is the current rate of interest being paid on investments with similar characteristics            

Sandra borrows $1,000 at an interest rate of 12%. If Sandra pays $133 interest at year-end, the interest rate is _______ interest          

A series of payments in the same amount is referred to as               

Sharon receives $100 at the end of each month for 5 years. The type of annuity she is receiving is called a(n)           

Tom signs a contract to rent a car for 3 years. The first payment is due the day the agreement is signed. This type of annuity is an             

True or False: Preent value calculations are used in calculating pension contributions for defined benefit plans           

Valuing defined benefit pension obligation typically requires he calculation of the present value of a             

Which of the following are monetary assets?             

 

 

A _ annuity exist when the first cash flow occurs more than one period after the date the agreements begins           

An annuity in which the first payment is due at the beginning of the contract is called an                

__ assets include money and claims to receive money, the amount is fixed or determinable               

A bond will be issued at a discount when the market rate of interest is:                   

The first cash flow of an ordinary annuity occurs when?                   

The first payment of an ______ occurs on the first day of the agreement                   

The future value of a series of equal-sized cash flows with the first payment taking place at the end of the first period is a __            

Harry Byrd’s Chicken Shack agrees to pay an employee $50,000 a year for six years beginning two years from today and decides to fund the payments by depositing one lump sum in a savings account today. The company should use which present value concept to determine the required deposit?                  

How much will accumulate ?             

If you have a set of PV tables, an annual interest rate, the dollar amount of equal payments made, and the number of semiannual payment, what other information do you need to calculate the PV of the series of payments?             

In situations when the compounding period is less than a year, the interest rate per compounding period is determined by diving the annual rate by what?          

Interest is typically stated as an ____ rate regardless of the compounding period involved                 

The ___ interest rate is the amount at which money will actually grow per year with compounding interest               

The interest used in the expected cash flow approach to estimating the value of assets or liabilities is the:                

An _ is a series of equal payment received or paid at equal intervals.            

Monetary payables and receivables are valued based on                  

Notes Receivable is reported at          

An obligation to pay amounts of cash which is fixed or determinable is called a(n) ___ liability           

The price of a bond includes:             

The __ rate of interest is the current rate of interest being paid on investment with similar characteristics.                 

The ___ rate of interest is used to compute the cash interest paid to bond holders               

The rate of interest printed on the face of the bond is referred to as the __ interest rate..                 

Required annual installment payment =                   

Sandra borrows $1,000 at an interest rate of 12% If she pays $133 interest at year-end, the interest rate is ___ interest                   

A series of payments in the same amount is referred to as ___           

Sharon receives $100 at the end of each month for 5 years. The type of annuity she is receiving is called an             

Simple interest is computed by multiplying which of the following?               

The term used to describe the rate at which money will grow during a full year are the __ and the __            

Time value of money calculations are required for which topics?                  

Today, the value of a series of equal-sized cash flows with the first payment taking place at the end of the first compounding period is the :             

TVM calculations are required for which topics?                   

TVM concepts are useful in valuing ___ and ___          

What are the four variables in present value annuity problems?          

What is required to compute the present value of a known future amount               

When determining the fair value of an asset or liability, which of the following two issues should be considered regarding the cash flows?                 

Which account uses TVM concepts to value the account?                 

Which of the following accounts uses TVM concepts to value the account?               

Which of the following are common annuity examples?                   

Which of the following items require time value of money concepts?             

 

 

The amount of money paid or received in excess of the amount of money borrowed or lent is referred to as what?                   

Carol expects to receive $1,000 at the end of each year for 5 years. The annuity has an interest rate of 10%. The present value of this annuity at Time Zero, the inception of the annuity (rounded to the nearest dollar) is                 

Lenny borrowed $10,000 on a 5-year interest bearing note with an interest rate of 10%. At the end of 5 years, Lenny must repay the bank $16,105. Based on the amount that must be repaid, interest was calculated with what type of interest rate?             

Most monetary liabilities are valued at the (1) value of (2) cash flows. (Enter one word per blank.)                

On January 1, Biggs Corp. borrowed $20,000 with 4% simple interest. What is the amount of interest that must be paid at year-end?                 

The _____ rate of interest on a bond is the interest rate printed on the bond; the ______ rate of interest is the current rate of interest being paid on investments with similar characteristics. (Enter one word per blank)                

Simple interest is computed by multiplying which of the following? (Select all that apply.)                

Which of the following items require time value of money concepts? (Select all that apply.)               

A series of payments in the same amount is referred to as