1
,2
,Test Bank for Financial & Managerial Accounting, 20th Edition by Jan Williams
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Answers Included z!
Appendix B z!
1) Future value is the amount that must be invested today at a specific interest rate to receive a
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! particular amount at some future date.
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2) The present value of an ordinary annuity is the amount that must be invested today at a
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! specific interest rate to in order to receive a particular amount at the end of a specified
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z! number of future periods.
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3) The future value of an investment gradually increases toward its present value amount.
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⊚ true z !
⊚ false z !
4) Compound interest assumes that the interest earned on a particular investment is reinvested.
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⊚ true z !
⊚ false z !
5) Discounting a future value amount will determine its present value amount.
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⊚ true z !
⊚ false z !
6) The lower the discount rate of an investment, the lower the present value of the investment.
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⊚ true z !
⊚ false z !
7) Annuities provide a series of cash flows to investors at regular intervals for a specified period
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of time.
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3
, 8) The market price of a bond is equal to the discounted present value of its future cash flows.
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⊚ true z !
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9) An ordinary annuity is the discounted present value of a series of cash flows made at the
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! beginning of each of a specified number of periods.
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⊚ true z !
⊚ false z !
10) Interest rate percentages can be expressed in a variety of ways, including monthly, quarterly,
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! semiannually, and annually. z! z!
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11) The difference between a present value and a related future value amount depends on (1) the
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! discount rate and (2) the length of time over which the present value accumulates interest.
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⊚ true z !
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12) The liability for post-
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retirement benefits is reported at the discounted present value of anticipated future cash outl
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ays to retired employees in the form of pensions, health insurance premiums, etc.
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13) As discount rates used to value investments increase, the present values of those investments
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! decreases.
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4
,2
,Test Bank for Financial & Managerial Accounting, 20th Edition by Jan Williams
z! z! z! z! z! z! z! z! z! z! z!
Answers Included z!
Appendix B z!
1) Future value is the amount that must be invested today at a specific interest rate to receive a
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! particular amount at some future date.
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⊚ true z !
⊚ false z !
2) The present value of an ordinary annuity is the amount that must be invested today at a
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! specific interest rate to in order to receive a particular amount at the end of a specified
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z! number of future periods.
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⊚ false z !
3) The future value of an investment gradually increases toward its present value amount.
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⊚ true z !
⊚ false z !
4) Compound interest assumes that the interest earned on a particular investment is reinvested.
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⊚ true z !
⊚ false z !
5) Discounting a future value amount will determine its present value amount.
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⊚ true z !
⊚ false z !
6) The lower the discount rate of an investment, the lower the present value of the investment.
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⊚ true z !
⊚ false z !
7) Annuities provide a series of cash flows to investors at regular intervals for a specified period
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of time.
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⊚ false
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3
, 8) The market price of a bond is equal to the discounted present value of its future cash flows.
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⊚ true z !
⊚ false z !
9) An ordinary annuity is the discounted present value of a series of cash flows made at the
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! beginning of each of a specified number of periods.
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⊚ true z !
⊚ false z !
10) Interest rate percentages can be expressed in a variety of ways, including monthly, quarterly,
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! semiannually, and annually. z! z!
⊚ true z !
⊚ false z !
11) The difference between a present value and a related future value amount depends on (1) the
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! discount rate and (2) the length of time over which the present value accumulates interest.
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⊚ true z !
⊚ false z !
12) The liability for post-
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retirement benefits is reported at the discounted present value of anticipated future cash outl
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ays to retired employees in the form of pensions, health insurance premiums, etc.
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⊚ true z !
⊚ false z !
13) As discount rates used to value investments increase, the present values of those investments
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! decreases.
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⊚ false z !
4
