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The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment.

A) True
B) False

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Explain the concept of the present value of a single amount.

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The present value of a single ...

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A company needs to have $200,000 in four years, and will create a fund to ensure that the $200,000 will be available. If they can earn a 7% return, how much must the company invest in the fund today to equal the $200,000 at the end of four years?

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$200,000 x...

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When you reach retirement age, you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702. The fund will earn 6% per year. For how many years will you be able to draw an even amount of $14,702?

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The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know its worth at the future date.

A) True
B) False

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A company is creating a fund by depositing $65,763 today. The fund will grow to $90,000 after eight years. What annual interest rate is the company earning on the fund?

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$65,763/$90,000 = 0.7307
This ...

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Madera Iron Sculpting is planning to save the money needed to replace one of its robotic welders in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1. The deposits will earn 10% interest. How much money will Sierra have accumulated at the end of five years to replace the welder?

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The present value of $5,000 per year for three years at 12% compounded annually is $12,009.

A) True
B) False

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At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in five years.

A) True
B) False

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False

An annuity is a series of equal payments occurring at equal intervals.

A) True
B) False

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The future value of $100 compounded semiannually for three years at 12% equals $140.49.

A) True
B) False

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The number of periods in a present value calculation can only be expressed in years.

A) True
B) False

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The interest rate is also called the __________________ rate.

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The number of periods in a future value calculation can only be expressed in years.

A) True
B) False

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Troy has $105,000 now. He has a loan of $175,000 that he must pay at the end of five years. He can invest his $105,000 at 10% interest compounded semiannually. Will Troy have enough to pay his loan at the end of the five years?

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$105,000 x 1.6289 = ...

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A company has $50,000 today to invest in a fund that will earn 7%. How much will the fund contain at the end of eight years?

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$50,000 x 1.7182 = $85,910

Explain the concept of the future value of an annuity.

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The future value of an annuity...

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A company is considering investing in a project that is expected to return $350,000 four years from now. How much is the company willing to pay for this investment if the company requires a 12% return?


A) $ 55,606
B) $137,681
C) $222,425
D) $265,764
E) $350,000

F) All of the above
G) C) and D)

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What interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000?


A) 5%
B) 8%
C) 10%
D) 12%
E) 15%

F) A) and E)
G) All of the above

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A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in seven years. The fund will earn 7% interest, and the company intends to put away a series of equal year-end amounts for seven years. What amount must the company deposit annually?

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$8,654,000...

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