Time Value of Money (Quiz 1)

12 questions

1. 1. A successful business man wants to provide scholarships for the education of intelligent but needy children. He plans to setup a fund that will be used to give out donations worth $20,000 every year in perpetuity. He will start giving these scholarships 5 years from now. He plans to deposit a lump sum today that will grow at a rate of 10% compounded semi-annually. How much lump sum should he deposit today to be able to meet the requirements of the perpetuity?
   $132,066$195,122$200,000
2. 2. An investor deposits a sum of $5,000 in a savings scheme that provides an interest of 7% compounded monthly. How much will his investment grow to in 5 years?
   $7012.76$7,088.13$11,260.96
3. 3. An investor made an investment of $10,000 in a fixed deposit. After 5 years, he received an amount of $15,000. Assuming semi-annual compounding, what is the effective annual rate earned on the investment?
   4.14%8.45%12.9%
4. 4. An investor wants to have saved $10,000 in a period of 3 years. How much should he invest today to reach his target in 3 years when his investment account earns 9% per annum?
   $9174.31$7,678.96$7,721.83
5. 5. Ken Atkins had taken a 30-year mortgage of $100,000 for his home 5 years back. The interest rate on the mortgage is a fixed rate of 12% per annum. He has been paying equated monthly payments on the loan. What will be the current loan balance?
   38,283.22$61,716.78$97,663.25
6. 6. An investor deposits $10,000 in an investment account that provides an annual interest of 10% compounded monthly. What will be the value of the investment at the end of 5 years?
   $16,105.10$16,453.09$18,166.97
7. 7. Ryan makes a deposit of $20,000 in his bank account. The deposit will earn an annual rate of 9% compounded quarterly. How much will Ryan have on deposit at the end of six years?
   $26,045.20$33,542.00$34,115.33
8. 8. An investment provides an interest rate of 9% compounded quarterly. What is the effective annual yield?
   9%9.31%9.38%
9. 9. You come across an investment in a real estate project that expects to pay investors $1,000 at the end of each month for the next 10 years. You think that a reasonable return on your investment is 15% compounded monthly. With your return objective in mind, how much should you pay for the investment?
   $6,666.66$60,225.22$61,982.85
10. 10. Chris has to make a loan payment of $100,000 10 years from now. He wants to make an annual payment at the end of every year into a sinking fund that will earn him an interest rate of 12% per annum. How much should his annual payments be so that he can meet his loan obligation?
    $5,698.41$5087.87$6,664.00
11. 11. An ordinary annuity pays $1,000 at the end of each year for the next 20 years. The rate of return is 9%. What will be the future value of the annuity?
    $51,160.12$55,764.53$56,074.67
12. 12. An ordinary annuity pays $1,000 at the end of each month for the next 10 years. The rate of return is 9% compounded monthly. What will be the future value of the annuity?
    A. $193,514.27B. $194.965.63C. $344,289.06