Question 41 of 50

What is the primary difference between simple interest and compound interest?

According to the example in Illustration G-1, if you borrowed EUR 5,000 for 2 years at a simple interest rate of 12 percent annually, what would be the total interest paid?

What is the future value of a single amount?

Using Table 1 from Appendix G, what is the future value of EUR 1,000 invested for 4 years at 9 percent compounded annually?

What is a series of equal dollar amounts to be paid or received at evenly spaced time intervals called?

Using Table 2 from Appendix G, what is the future value of an investment of EUR 2,500 made at the end of each year for 4 years, earning 6 percent interest compounded annually?

The process of determining the value now of an amount to be paid or received in the future is referred to as what?

Using Table 3 from Appendix G, what is the present value of EUR 1,000 to be received in 5 years, assuming a discount rate of 10 percent?

Which of the following situations would require using the Present Value of an Annuity of 1 table (Table 4)?

Based on the example in Illustration G-16, what is the present value of 5 annual rental payments of EUR 6,000, discounted at 12 percent?

When calculating the present value of a bond, why must you discount both the principal and the interest payments?

For a 10 percent, five-year bond with a face value of EUR 100,000 and semiannual interest payments, what are the number of periods (n) and the interest rate (i) used for discounting?

Using the values from Illustration G-19, what is the present value of a EUR 100,000, 10 percent, 5-year bond with semiannual interest payments, when the discount rate is also 10 percent?

If the discount rate is 12 percent but the contractual interest rate on a bond is 10 percent, the present value of the bond will be:

What is the primary objective of using discounted cash flow techniques in capital budgeting decisions?

In the Nagel-Siebert Trucking Company example, what is the net present value of the investment if the company uses a 10 percent discount rate?

What is the net present value (NPV) decision rule?

How does the internal rate of return (IRR) method differ from the net present value (NPV) method?

What is the first step in determining the internal rate of return (IRR) for a project with equal annual cash flows?

An investment of EUR 130,000 has expected net annual cash flows of EUR 39,000 for 5 years. What is the internal rate of return factor?

If the internal rate of return factor for a 5-year project is 3.3333, what is the approximate internal rate of return according to Table 2 in Appendix G?

What is the IRR decision rule?

How does the time value of money concept explain why you would prefer to receive EUR 1,000 today versus EUR 1,000 a year from now?

Which of the following is NOT one of the three elements that determines the amount of interest?

What is the present value of a single sum of EUR 84,253 to be received in five years, discounted at 11 percent, according to the financial calculator example in Illustration G-26?

Which statement is true when comparing the present value of EUR 1,000 at a 10 percent discount rate versus a 15 percent discount rate?

If you receive EUR 500 semiannually for three years instead of EUR 1,000 annually, how do the number of periods and discount rate change for present value calculations, assuming a 10 percent annual rate?

When using a financial calculator for a present value of a single sum problem, what value is typically entered for the PMT key?

If you invest EUR 1,000 for three years at 9 percent simple interest, what is the total amount you will have at the end of the three years?

If you invest EUR 1,000 for three years at 9 percent interest compounded annually, what is the total amount of compound interest earned?

To determine the future value of EUR 20,000 invested for 18 years at 6 percent compounded annually, which table and factor would be most appropriate?

In the demonstration problem on page G-9 (Illustration G-12), what is the present value of EUR 10,000 to be received in 3 years, discounted at 8 percent?

In capital budgeting, the net present value (NPV) method is used to evaluate an investment in a new truck by Nagel-Siebert Trucking Company. Which of the following cash flows is NOT discounted?

In the Nagel-Siebert example, if the discount rate increases from 10 percent to 15 percent, what is the effect on the net present value of the truck investment?

Which of the following describes the future value of an annuity?

Using Table 4, what is the present value of an annuity of EUR 1 to be received for 10 periods at 8 percent?

If a financial calculator displays a present value answer as -50,000 after a future value of 84,253 was entered as a positive number, what does the negative sign on the answer indicate?

For a mortgage loan with monthly payments, what must be done to the annual interest rate and the number of years to correctly calculate payments using a financial calculator?

According to the auto loan example in Illustration G-28, what are the correct inputs for N (number of periods) and PV (present value) to calculate the monthly payment?

Which of the three elements that determine interest represents the original amount borrowed or invested?

What is the key difference in calculating the future value of a single sum versus the future value of an annuity?

Using Table 1, what is the future value of a single amount of EUR 1.00 after 20 periods at 15 percent?

Using Table 3, what is the present value of EUR 1.00 to be received after 20 periods, discounted at 15 percent?

According to the mortgage loan example in Illustration G-29, what is the maximum home loan someone can afford with a EUR 700 monthly payment over 15 years at an 8.4 percent annual interest rate?

When discounting unequal net annual cash flows for a capital budgeting project, which method must be used?

In Illustration G-24, why is the present value of the unequal cash flows (EUR 147,339) higher than the present value of the equal cash flows in the prior example (EUR 140,586), even though the total cash flow is the same (EUR 195,000)?

If you invest EUR 2,000 at the end of year 1, EUR 2,000 at the end of year 2, and EUR 2,000 at the end of year 3 at 5 percent interest, why does the year 3 investment not earn any interest?

Which of these financial instruments' value is determined by discounting a principal amount and a series of interest payments?

When would simple interest and compound interest calculations for a one-year period yield the same result?