Tải bản đầy đủ

Bài test tiếng Anh ngành ngân hàng và đáp án phần 5

Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
1. Time value of money is based on the belief that people have a positive time preference
for consumption.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
2. Individuals prefer to consume goods in the future rather than right away.
A) True
B)


False

Ans: B

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
3. The value of a dollar invested at positive interest rate grows over time.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Medium
4. The value of a dollar invested at positive interest rate grows over time but at an
increasingly slower rate further into the future.
A) True
B)

False

Ans: B
5-1


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
5. The further in the future you receive a dollar, the more it is worth today.
A) True
B)

False


Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
6. The higher the rate of interest, the more likely you will elect to invest your funds and
forego current consumption.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
7. Future value focuses on the valuation of cash flows received over time, while present
value focuses on the valuation of cash flows received at a point in time.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
8. The present value technique uses discounting to find the present value of each cash
flow at the beginning of the project.
A) True
B)

False

Ans: A
5-2


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
9. The present value technique uses compounding to find the present value of each cash
flow at the beginning of the project.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
10. The future value technique uses discounting to find the future value of each cash flow
at the end of the project's life.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
11. The future value technique uses compounding to find the future value of each cash flow
at the end of the project's life.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
12. Compounding is the process by which interest earned on an investment is reinvested so
that in future periods, interest is earned on the interest as well as the principal.
A) True

5-3


Test Bank, Fundamentals of Corporate Finance, 2e

B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
13. Compound interest consists of both simple interest and interest-on-interest.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
14. Compound interest consists only of interest-on-interest.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
15. Compounding accelerates the growth of the total interest earned.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
16. The growth rate over time is linear.
A) True
B)

False
5-4


Test Bank, Fundamentals of Corporate Finance, 2e

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Medium
17. The growth rate over time is exponential.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
18. Berrian invested $5,000 in an account earning 10 percent for one year. If he had left his
investment in that account for another two years, he would expect the total interest
earned over the three years to be higher by exactly $1,000.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
19. The higher the interest rate on an investment, the more money that is accumulated for
any time period.
A) True
B)

False

Ans: A

5-5


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
20. The more frequently the interest payments are compounded, the larger the future value
of $1 for a given time period.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
21. If Bank A pays interest on a monthly basis and Bank B pays the same interest on a
quarterly basis, then investing $1,000 in Bank B will lead to a higher future value than
investing the same amount in Bank A.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
22. The present value can be thought of as the discounted value of a future amount.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
23. The present value is simply the current value of a future cash flow that has been
discounted at the appropriate discount rate.
A) True
B)

False

Ans: A
5-6


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
24. The Rule of 72 allows one to calculate the return earned on an investment over six
years.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
25. The Rule of 72 allows one to calculate the approximate time needed to double an
investment.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 4
Level of Difficulty: Easy
26. Compound growth occurs when the initial value of a number increases or decreases
each period by the factor (1 + growth rate).
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
27. The future value of an investment of $5,000 earning an annual interest of 10 percent
equals $6,000 at the end of one year.
A) True

5-7


Test Bank, Fundamentals of Corporate Finance, 2e

B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
28. The present value of an investment of $1,000 to be received in three years at a discount
rate of 10 percent is $751.31.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
29. The present value of an investment of $1,000 to be received in three years at a discount
rate of 10 percent is $1,331.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
30. The future value of an investment of $1,000 to be received in three years at a discount
rate of 10 percent is $1,331.
A) True
B)

False

Ans: A

5-8


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
31. The higher the discount rate, the lower the present value of a future cash flow.
A) True
B)

False

Ans: A

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
32. The lower the discount rate, the lower the present value of a future cash flow.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 3
Level of Difficulty: Medium
33. If you had a choice of choosing a payment of $5,000 to be received in five years being
discounted at 8 percent or at 10 percent, you should always choose the higher rate
because it gives you the higher present value.
A) True
B)

False

Ans: B

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
34. Randy has to choose between two cash flows. He could either receive the future value
of an investment of $1,000 at 8 percent annually in three years or in five years. Randy
should always choose the shorter investment term because it is worth more today.
A) True
B)

False

Ans: B
5-9


Test Bank, Fundamentals of Corporate Finance, 2e

Format: True/False
Learning Objective: LO 2
Level of Difficulty: Medium
35. If Laura has to choose between a loan that charges quarterly interest and a loan that
charges monthly interest, she should always choose the one charging quarterly interest.
A) True
B)

False

Ans: A

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
36. The time value of money refers to the issue of
A) what the value of the stream of future cash flows is today.
B)

why a dollar received tomorrow is worth more than a dollar received today.

C)

why a dollar received tomorrow is worth the same as a dollar received today.

D)

None of the above.

Ans: A

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
37. Which one of the following statements is NOT true?
A) The time value money refers to what the value of the stream of future cash flows
today is.
B) A dollar received today is worth more than a dollar received tomorrow.
C)

A dollar received tomorrow is worth less than a dollar received today.

D)

A dollar received today is worth less than a dollar received tomorrow.

Ans: D

5-10


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
38. Which one of the following statements is NOT true?
A) The value of a dollar invested at a positive interest rate grows over time.
B)

The further in the future you receive a dollar, the less it is worth today.

C)

A dollar in hand today is worth more than a dollar to be received in the future.

D)

The further in the future you receive a dollar, the more it is worth today.

Ans: D

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
39. Future value measures
A) what one or more cash flows are worth at the end of a specified period.
B)
C)

what one or more cash flows that is to be received in the future will be worth
today.
both a and b

D)

None of the above

Ans: A

Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
40. Which one of the following statements is true?
A) Individuals prefer to consume goods right away rather than in the future.
B)

Individuals prefer to consume goods in the future rather than right away.

C)

The time of consumption is irrelevant to individuals.

D)

None of the above.

Ans: A

5-11


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: easy
41. The process of converting an amount given at the present time into a future value
is called
A) time value of money.
B)

discounting.

C)

compounding.

D)

None of the above.

Ans: C

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
42. The process of converting future cash flows to what its present value is
A) time value of money.
B)

discounting.

C)

compounding.

D)

none of the above.

Ans: B

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
43. Which one of the following statements is NOT true?
A) Present value calculations involve bringing a future amount back to the present.
B)
C)

The present value (PV) is often called the discounted value of future cash
payments.
The present value factor is more commonly called the discount factor.

D)

All of the above are true statements.

Ans: D

5-12


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
44. Which one of the following statements is NOT true?
A) Present value calculations involve bringing a future amount back to the present.
B)
C)

The future value is often called the discounted value of future cash
payments.
The present value factor is more commonly called the discount factor.

D)

The higher the discount rate, the lower the present value of a dollar.

Ans: B

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Easy
45. The Rule of 72
A) can be used to determine the amount of time it takes to double an investment.
B)

is fairly accurate for interest rates between 25 and 50 percent.

C)

states that the time to double your money (TDM) approximately equals 72/i,
where 72 represents the years it takes to double your investment.
None of the above describe the Rule of 72.

D)

Ans: A

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
46. Using higher discount rates will
A) not affect the present value of the future cash flow.
B)

increase the present value of any future cash flow.

C)

decrease the present value of any future cash flow.

D)

None of the above.

Ans: C

5-13


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
47. Using higher interest rates will
A) not affect the future value of the investment.
B)

increase the future value of any investment.

C)

decrease the future value of any investment.

D)

None of the above.

Ans: B

Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Medium
48. Using lower discount rates will
A) not affect the present value of the future cash flow.
B)

increase the present value of any future cash flow.

C)

decrease the present value of any future cash flow.

D)

None of the above.

Ans: B

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
49. Using lower interest rates will
A) decrease the future value of any investment.
B)

increase the future value of any investment.

C)

not affect the future value of the investment.

D)

None of the above.

Ans: A

5-14


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
50. Your aunt is looking to invest a certain amount today. Which of the following choices
should she opt for?
A) three-year CD at 6.5% annual rate
B)

three-year CD at 6.75% annual rate

C)

three-year CD at 6.25% annual rate

D)

three-year CD at 7% annual rate

Ans: D

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
51. Future value: You are interested in investing $10,000, a gift from your grandparents,
for the next four years in a mutual fund that will earn an annual return of 8 percent.
What will your investment be worth at the end of four years? (Round to the nearest
dollar.)
A) $10,800
B)

$13,605

C)

$13,200

D)

None of the above

Ans: B
Feedback:
Present value of the investment = PV = $10,000
Return on mutual fund = i = 8%
No. of years = n = 4.
0 1 2 3 4
├───┼───┼───┼────┤
-$10,000
FV=?
FV4  PV �(1  i )n  $10,000 �(1.08) 4
 $13, 604.89

5-15


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
52. Future value: Ning Gao is planning to buy a house in five years. She is looking to
invest $25,000 today in an index mutual fund that will provide her a return of 12
percent annually. How much will she have at the end of five years? (Round to the
nearest dollar.)
A) $45,000
B)

$28,000

C)

$44,059

D)

None of the above

Ans: C
Feedback:
Present value of the investment = PV = $25,000
Return on mutual fund = i = 12%
No. of years = n = 5.
0 1 2 3 4 5
├───┼───┼───┼────┼───┤
-$25,000
FV = ?
FV5  PV �(1  i )n  $25,000 �(1.12)5
 $44,058.54
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
53. Future value: Carlos Lopes is looking to invest for the next three years. He is looking
to invest $7,500 today in a bank CD that will earn interest at 5.75 percent annually.
How much will he have at the end of three years? (Round to the nearest dollar.)
A) $8,870
B)

$8,000

C)

$8,681

D)

None of the above

Ans: A

5-16


Test Bank, Fundamentals of Corporate Finance, 2e

Feedback:
Present value of the investment = PV = $7,500
Interest rate on CD = i = 5.75%
No. of years = n = 3.
0 1 2 3
├───┼───┼───┤
-$7,500
FV=?
FV3  PV �(1  i )n  $7,500 �(1.0.0575)3
 $8,869.57
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
54. Future value: Wes Ottey would like to buy a condo in Florida in six years. He is
looking to invest $75,000 today in a stock that is expected to earn a return of 18.3
percent annually. How much will he have at the end of six years? (Round to the nearest
dollar.)
A) $205,575
B)

$157,350

C)

$184,681

D)

None of the above

Ans: A
Feedback:
Present value of the investment = PV = $75,000
Return on stock = i = 18.3%
No. of years = n = 6.
0 1 2 3 4 5 6
├───┼───┼────┼───┼───┼───┤
-$75,000
FV=?
FV6  PV �(1  i )n  $75,000 �(1.183)6
 $205,574.73

5-17


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
55. Future value: Brittany Willis is looking to invest for retirement, which she hopes will
be in 20 years. She is looking to invest $22,500 today in U.S. Treasury bonds that will
earn interest at 6.25 percent annually. How much will she have at the end of 20 years?
(Round to the nearest dollar.)
A) $68,870
B)

$50,625

C)

$75,642

D)

None of the above

Ans: C
Feedback:
Present value of the investment = PV = $22,500
Return on Treasury bonds = i = 6.25%
No. of years = n = 20.
0 1 2 3
19 20
├───┼───┼───┼……………─┼────┤
-$22,500
FV=?
FV20  PV �(1  i )n  $22,500 �(1.0.0625) 20
 $75,641.70
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
56. Multiple compounding periods (FV): Your brother has asked you to help him with
choosing an investment. He has $5,000 to invest today for a period of two years. You
identify a bank CD that pays an interest rate of 4.25 percent with the interest being paid
quarterly. What will be the value of the investment in two years?
A) $5,434
B)

$5,441

C)

$5,107

D)

$5,216

Ans: B

5-18


Test Bank, Fundamentals of Corporate Finance, 2e

Feedback:
0
2 years
├────────────────────┤
PV = $5,000
FV = ?
Amount invested today = PV = $5,000
Interest rate on CD = i = 4.25%
Duration of investment = n = 2 years
Frequency of compounding = m = 4
Value of investment after 4 years = FV4
4�2

mn

� i �
� 0.0425 �
FV2  PV ��
1  �  $5,000 ��
1

4 �
� m�

 $5,000 �(1.010625)8
 $5, 441.15

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
57. Multiple compounding periods (FV): Normandy Textiles had a cash inflow of $1
million, which it needs for a long-term investment at the end of one year. It plans to
deposit this money in a bank CD that pays daily interest at 3.75 percent. What will be
the value of the investment at the end of the year? (Round to the nearest dollar.)
A) $1,211,375
B)

$1,000,103

C)

$1,037,500

D)

$1,038,210

Ans: D

5-19


Test Bank, Fundamentals of Corporate Finance, 2e

Feedback:
0
1
├────────────────────┤
PV = $1,000,000
FV = ?
Amount invested today = PV = $1,000,000
Interest rate on CD = i = 3.75%
Duration of investment = n = 1 year
Frequency of compounding = m = 365
Value of investment after 1 year = FV1
365�
1

mn

� i �
� 0.0375 �
FV1  PV ��
1  �  $1,000,000 ��
1

� m�
� 365 �
 $1,000,000 �(1.00010274)365
 $1, 038, 210

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
58. Multiple compounding periods (FV): Your mother is trying to choose one of the
following bank CDs to deposit $10,000. Which one will have the highest future value if
she plans to invest for three years?
A) 3.5% compounded daily
B)

3.25% compounded monthly

C)

3.4% compounded quarterly

D)

3.75% compounded annually

Ans: A

5-20


Test Bank, Fundamentals of Corporate Finance, 2e

Feedback:

A) Interest rate on CD = i = 3.5%
Frequency of compounding = m = 365
Value of investment after 3 years = FV3
365�3

mn

� i �
� 0.035 �
FV1  PV ��
1  �  $10,000 ��
1

� m�
� 365 �
 $10,000 �(1.00009589)1095
 $11,107.05
B) Interest rate on CD = i = 3.25%
Frequency of compounding = m = 12
Value of investment after 3 years = FV3

12�3

mn

� i �
� 0.0325 �
FV1  PV ��
1  �  $10,000 ��
1

12 �
� m�

 $10,000 �(1.002708333)36
 $11, 022.66
C) Interest rate on CD = i = 3.4%
Frequency of compounding = m = 4
Value of investment after 3 years = FV3
4�3

mn

� i �
� 0.034 �
FV1  PV ��
1  �  $10,000 ��
1

4 �
� m�

 $10,000 �(1.0085)12
 $11,069.06
D) Interest rate on CD = i = 3.75%
Frequency of compounding = m = 1
Value of investment after 3 years = FV3

5-21


Test Bank, Fundamentals of Corporate Finance, 2e

= $10,000 x (1.0375)3
= $11,167.71
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
59. Multiple compounding periods (FV): Carlyn Botti wants to invest $3,500 today in a
money market fund that pays quarterly interest at 5.5 percent. She plans to fund a
scholarship with the proceeds at her alma mater, Towson University. How much will
Carlyn have at the end of seven years? (Round to the nearest dollar.)
A) $5,091
B)

$3,548

C)

$5,130

D)

$5,075

Ans: C
Feedback:

Amount invested today = PV = $3,500
Interest rate on money market account = i = 5.5%
Duration of investment = n = 7 years
Frequency of compounding = m = 4
Value of investment after 7 years = FV7
4�7

mn

� i �
� 0.055 �
FV7  PV ��
1  �  $3,500 ��
1

4 �
� m�

 $3,500 �(1.01375)28
 $5,130.18

5-22


Test Bank, Fundamentals of Corporate Finance, 2e

Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Medium
60. Multiple compounding periods (FV): Hector Cervantes started on his first job last
year and plans to save for a down payment on a house in 10 years. He will be able to
invest $12,000 today in a money market account that will pay him an interest of 6.25
percent on a monthly basis. How much will he have at the end of 10 years?
A) $12,640
B)

$22,383

C)

$24,839

D)

None of the above

Ans: B
Feedback:

Amount invested today = PV = $12,000
Interest rate on money market account = i = 6.25%
Duration of investment = n = 10 years
Frequency of compounding = m = 12
Value of investment after 10 years = FV10
12�
10

mn

� i �
� 0.0625 �
FV10  PV ��
1  �  $12,000 ��
1

12 �
� m�

 $12,000 �(1.005208333)120
 $22, 382.62

Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
61. Compounding: Trish Harris has deposited $2,500 today in an account paying 6 percent
interest annually. What would be the simple interest earned on this investment in five
years? If the account paid compound interest, what would be the interest-on-interest in
five years?
A) $750;
$95.56
5-23


Test Bank, Fundamentals of Corporate Finance, 2e

B)

$150;

$845.56

C)

$150;

$95.56

D)

$95.56; $845.56

Ans: A
Feedback:
Deposit today = PV = $2,500
Interest rate = i = 6%
No. of years = n = 5
Simple interest:
Simple interest per year = $2,500 (0.06) = $150.00
Simple interest for 5 years = $150 x 5 = $750.00
Future value with compound interest:
FV5 = $2,500 (1 + 0.06)5 = $3,345.56
Simple interest = $750
Interest on interest = $3,345.56 – $2,500 – $750 = $95.56
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
62. Compounding: Joachim Noah is investing $5,000 in an account paying 6.75 percent
annually for three years. What is the interest-on-interest if interest is compounded?
A) $1,012.50
B)

$1,082.38

C)

$82.38

D)

$69.88

Ans: D

5-24


Test Bank, Fundamentals of Corporate Finance, 2e

Feedback:
Deposit today = PV = $5,000
Interest rate = i = 6.75%
No. of years = n = 3
Simple interest:
Simple interest per year = $5,000 (0.0675) = $337.50
Simple interest for 3 years = $337.50 x 3 = $1,012.50
Future value with compound interest:
FV3 = $5,000 (1 + 0.0675)3 = $6,082.38
Simple interest = $1,012.50
Interest on interest = $6,082.38 – $5,000 – $1,012.50 = $69.88
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: Medium
63. Compounding: Chung Lee wants to invest $3,000 in an account paying 5.25 percent
compounded quarterly. What is the interest on interest after four years?
A) $695.98
B)

$65.98

C)

$630.00

D)

None of the above

Ans: B

5-25


Tài liệu bạn tìm kiếm đã sẵn sàng tải về

Tải bản đầy đủ ngay

×