Corporate finance-quiz2

You invest $800 in an account that pays 6% interest, compounded annually.  How much money do you have after five years?  Round your answers to the nearest cent. 

• $898.09
• $1070.58
• $1710.58
• $975.68

The "time value of money" means that

• money paid out today less value than if the money is paid out in the future

• money received today is worth more than the same amount of money received in the future

• the more time a person has to save, the lower the return on the money

• the longer money is held, the less likely it will be spent

Today, you deposit RM500 into Bank A saving account that pays 8% interest per year. How much will you have in five years?

• RM738.73

• RM734.66

• RM834.66

• RM850.66

Parents want to save $100,000 for their child's education. They plan to make fifteen equal year end payments and expect to earn an 8% annual interest rate. How much will they have to invest annually to accumulate the $100,000 ?

• $2,542

• $3,683

• $6,139

• $7,285

The more frequently interest is compounded the greater the future value

• True

• False

Brittany will be working full time this summer to save for her goal of having $10,000 by the time she’s 21. Brittany has an account that will pay 3.5% interest, compounded monthly. She’ll turn 17 at the end of the summer. About how much will Brittany have to deposit at the end of the summer so that her money can grow into $10,000 by the time she’s 21?

• $8,663

• $8,681

• $8,695

• $8,720

Long-term bonds are ... than short-term bonds.

• more liquid

• less risky

• less sensitive to interest rate changes

• subject to more uncertainty

If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.

• True

• False

A firm has an issue of $1,000 par value bonds with a 9 percent stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11 percent, the firm's bond will sell for ________ today.

• $1,000

• $716.67

• $840.67

• $1,123.33

Hewitt Packing Company has an issue of $1,000 par value bonds with a 14 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The current value of each Hewitt bond is ________.

• $791.00

• $1,000

• $1,052.24

• $1,113.00