FOUNDATIONS OF FINANCE (BMAN23000) SEMESTER EXAM |
QUESTIONS AND VERIFIED ANSWERS | ALREADY HIGHLY RATED
| LATEST EXAM UPDATE
1. What is the present value of $1,000 to be received in 3 years if the
discount rate is 5% per year?
A) $863.84
B) $950.00
C) $1,050.00
D) $1,157.63
A) $863.84
2. Which of the following best describes the time value of money?
A) A dollar today is worth less than a dollar tomorrow
B) A dollar today is worth more than a dollar tomorrow
C) A dollar today is always equal to a dollar tomorrow
D) Money loses value over time due to inflation only
B) A dollar today is worth more than a dollar tomorrow
3. The future value of $500 invested for 5 years at an annual interest rate of
6% compounded annually is:
A) $670.00
B) $670.58
C) $632.00
D) $500.00
B) $670.58
4. Which of the following formulas represents the present value of a single
cash flow?
A) PV = FV × (1 + r)^t
B) PV = FV ÷ (1 + r)^t
C) PV = FV × t ÷ r
D) PV = FV ÷ t
B) PV = FV ÷ (1 + r)^t
5. Which of the following represents the future value of a single cash flow?
A) FV = PV × (1 + r)^t
B) FV = PV ÷ (1 + r)^t
, C) FV = PV ÷ t
D) FV = PV × t ÷ r
A) FV = PV × (1 + r)^t
6. If $1,000 is invested today at 8% annual interest, what will it be worth in
10 years?
A) $2,158.92
B) $2,000.00
C) $2,159.00
D) $1,800.00
A) $2,158.92
7. Which of the following best describes an annuity?
A) A single lump sum received today
B) A series of equal payments at regular intervals
C) A one-time investment with variable interest
D) A bond with a single maturity payment
B) A series of equal payments at regular intervals
8. Which of the following is an ordinary annuity?
A) Payments made at the beginning of each period
B) Payments made at the end of each period
C) Unequal payments
D) Single payment at maturity
B) Payments made at the end of each period
9. Which of the following best describes a perpetuity?
A) Cash flows received for a fixed number of years
B) Cash flows received indefinitely
C) Cash flows received once
D) Cash flows received for less than one year
B) Cash flows received indefinitely
10.What is the present value of a $100 annuity received annually for 5 years
at 6% interest?
A) $420.00
B) $421.00
C) $421.67
D) $400.00
C) $421.67
11.Which of the following best describes compound interest?
A) Interest earned only on the principal
, B) Interest earned on principal and previous interest
C) Interest calculated only at maturity
D) Interest ignored in valuation
B) Interest earned on principal and previous interest
12.Which of the following best describes simple interest?
A) Interest earned only on principal
B) Interest earned on principal and accumulated interest
C) Interest compounded monthly
D) Interest ignored in present value calculations
A) Interest earned only on principal
13.Which of the following is true regarding discounting?
A) Finding the present value of a future cash flow
B) Finding the future value of a present cash flow
C) Ignoring interest
D) Ignoring the time value of money
A) Finding the present value of a future cash flow
14.If $2,000 is invested for 4 years at 10% annual interest, what is the future
value?
A) $2,880
B) $2,926
C) $3,048
D) $3,200
C) $3,048
15.Which of the following is true regarding an annuity due?
A) Payments occur at the end of each period
B) Payments occur at the beginning of each period
C) Payments vary each year
D) Only single payment at maturity
B) Payments occur at the beginning of each period
16.Which of the following represents the formula for future value of an
ordinary annuity?
A) FV = PMT × [(1 + r)^n – 1] ÷ r
B) FV = PMT × [1 – (1 + r)^–n] ÷ r
C) FV = PMT × n × r
D) FV = PV ÷ r
A) FV = PMT × [(1 + r)^n – 1] ÷ r
, 17.Which of the following represents the formula for present value of an
ordinary annuity?
A) PV = PMT × [(1 + r)^n – 1] ÷ r
B) PV = PMT × [1 – (1 + r)^–n] ÷ r
C) PV = PMT × n × r
D) PV = FV ÷ (1 + r)^n
B) PV = PMT × [1 – (1 + r)^–n] ÷ r
18.A 5-year annuity pays $200 per year. If the discount rate is 8%, what is
the present value?
A) $834.00
B) $800.00
C) $850.00
D) $900.00
A) $834.00
19.Which of the following best describes a bond?
A) Ownership in a company
B) Debt instrument with fixed payments
C) Short-term loan only
D) Payment of dividends
B) Debt instrument with fixed payments
20.Which of the following is a characteristic of a coupon bond?
A) Pays interest at maturity only
B) Pays interest periodically
C) No fixed payments
D) Only equity instrument
B) Pays interest periodically
21.Which of the following best describes a zero-coupon bond?
A) Pays annual interest
B) Sold at a discount and pays no interest
C) Pays dividends
D) Matures early
B) Sold at a discount and pays no interest
22.Which of the following is the face value of a bond?
A) Price paid by investor
B) Amount repaid at maturity
C) Annual interest payment
QUESTIONS AND VERIFIED ANSWERS | ALREADY HIGHLY RATED
| LATEST EXAM UPDATE
1. What is the present value of $1,000 to be received in 3 years if the
discount rate is 5% per year?
A) $863.84
B) $950.00
C) $1,050.00
D) $1,157.63
A) $863.84
2. Which of the following best describes the time value of money?
A) A dollar today is worth less than a dollar tomorrow
B) A dollar today is worth more than a dollar tomorrow
C) A dollar today is always equal to a dollar tomorrow
D) Money loses value over time due to inflation only
B) A dollar today is worth more than a dollar tomorrow
3. The future value of $500 invested for 5 years at an annual interest rate of
6% compounded annually is:
A) $670.00
B) $670.58
C) $632.00
D) $500.00
B) $670.58
4. Which of the following formulas represents the present value of a single
cash flow?
A) PV = FV × (1 + r)^t
B) PV = FV ÷ (1 + r)^t
C) PV = FV × t ÷ r
D) PV = FV ÷ t
B) PV = FV ÷ (1 + r)^t
5. Which of the following represents the future value of a single cash flow?
A) FV = PV × (1 + r)^t
B) FV = PV ÷ (1 + r)^t
, C) FV = PV ÷ t
D) FV = PV × t ÷ r
A) FV = PV × (1 + r)^t
6. If $1,000 is invested today at 8% annual interest, what will it be worth in
10 years?
A) $2,158.92
B) $2,000.00
C) $2,159.00
D) $1,800.00
A) $2,158.92
7. Which of the following best describes an annuity?
A) A single lump sum received today
B) A series of equal payments at regular intervals
C) A one-time investment with variable interest
D) A bond with a single maturity payment
B) A series of equal payments at regular intervals
8. Which of the following is an ordinary annuity?
A) Payments made at the beginning of each period
B) Payments made at the end of each period
C) Unequal payments
D) Single payment at maturity
B) Payments made at the end of each period
9. Which of the following best describes a perpetuity?
A) Cash flows received for a fixed number of years
B) Cash flows received indefinitely
C) Cash flows received once
D) Cash flows received for less than one year
B) Cash flows received indefinitely
10.What is the present value of a $100 annuity received annually for 5 years
at 6% interest?
A) $420.00
B) $421.00
C) $421.67
D) $400.00
C) $421.67
11.Which of the following best describes compound interest?
A) Interest earned only on the principal
, B) Interest earned on principal and previous interest
C) Interest calculated only at maturity
D) Interest ignored in valuation
B) Interest earned on principal and previous interest
12.Which of the following best describes simple interest?
A) Interest earned only on principal
B) Interest earned on principal and accumulated interest
C) Interest compounded monthly
D) Interest ignored in present value calculations
A) Interest earned only on principal
13.Which of the following is true regarding discounting?
A) Finding the present value of a future cash flow
B) Finding the future value of a present cash flow
C) Ignoring interest
D) Ignoring the time value of money
A) Finding the present value of a future cash flow
14.If $2,000 is invested for 4 years at 10% annual interest, what is the future
value?
A) $2,880
B) $2,926
C) $3,048
D) $3,200
C) $3,048
15.Which of the following is true regarding an annuity due?
A) Payments occur at the end of each period
B) Payments occur at the beginning of each period
C) Payments vary each year
D) Only single payment at maturity
B) Payments occur at the beginning of each period
16.Which of the following represents the formula for future value of an
ordinary annuity?
A) FV = PMT × [(1 + r)^n – 1] ÷ r
B) FV = PMT × [1 – (1 + r)^–n] ÷ r
C) FV = PMT × n × r
D) FV = PV ÷ r
A) FV = PMT × [(1 + r)^n – 1] ÷ r
, 17.Which of the following represents the formula for present value of an
ordinary annuity?
A) PV = PMT × [(1 + r)^n – 1] ÷ r
B) PV = PMT × [1 – (1 + r)^–n] ÷ r
C) PV = PMT × n × r
D) PV = FV ÷ (1 + r)^n
B) PV = PMT × [1 – (1 + r)^–n] ÷ r
18.A 5-year annuity pays $200 per year. If the discount rate is 8%, what is
the present value?
A) $834.00
B) $800.00
C) $850.00
D) $900.00
A) $834.00
19.Which of the following best describes a bond?
A) Ownership in a company
B) Debt instrument with fixed payments
C) Short-term loan only
D) Payment of dividends
B) Debt instrument with fixed payments
20.Which of the following is a characteristic of a coupon bond?
A) Pays interest at maturity only
B) Pays interest periodically
C) No fixed payments
D) Only equity instrument
B) Pays interest periodically
21.Which of the following best describes a zero-coupon bond?
A) Pays annual interest
B) Sold at a discount and pays no interest
C) Pays dividends
D) Matures early
B) Sold at a discount and pays no interest
22.Which of the following is the face value of a bond?
A) Price paid by investor
B) Amount repaid at maturity
C) Annual interest payment
