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Exam 8: Time Value of Moneypart I: Future and Present Value of Lump Sums

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Question 1

Multiple Choice

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Joe M. purchases a house for $370,000. He sells the home 7 years later for $600,000. What is his internal rate of return (IRR) ?

A) 15.7%
B) 7.15%
C) 7.50%
D) 5.70%

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Question 2

Multiple Choice

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How long will it take for $500 to amount to $850 at 10% simple interest?

A) 10 years
B) 5 years
C) 3.5 years
D) 7 years
E) none of the above

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Question 3

Multiple Choice

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A college education costs approximately $75,000 at an Ivy League school, inflation averages 5%, what factor will you use to determine the cost of an education in 15 years?

JT purchases 1,000 shares of stock at $23.50 per share in January 2006. He sells the 1,000 shares in January 2110 for $35.50 per share. What is his internal rate of return?

The amount of interest that is deducted from the amount you wish to borrow in order to get proceeds is

If you purchase an automobile for $20,000 in 2004 and inflation is 4 percent, how much would a similar automobile sell for four years from then? To solve this problem you would use the formula for the

Juanita purchases a house for $410,000. She sells the home 8 years later for $1,200,000. What is her internal rate of return (IRR) ?

The approximate time that it takes a deposit to double at a certain interest rate is calculated by dividing the annual interest rate into the number

The time value of money is the loss of purchasing power that occurs over time as a result of inflation.

A Bridge Loan is a simple interest loan that provides funds to homeowners and business owners, bridging the time gap between the sale of one piece of property and the purchase of another piece of property.

In inflation, a dollar received now can purchase less than a dollar received five years from now.

If inflation averages 6 percent per year, what is the value of a dollar ten years from now?

Which of the following is true for Fixed Principal Commercial Loans?

In a Bridge Loan, the new owner can only own one property at a time.

The time value of money is the gain of purchasing power that occurs over time as a result of deflation.

When seeking a Bridge Loan, the borrower

In inflation, a dollar received now can purchase more than a dollar received five years from now.

If you paid $5.00 to go to a movie in 2001 and you paid $7.00 to go to a movie in 2007, the increase is price is probably due to

You have an absolutely brilliant child who is six years old and will be attending a private college in twelve years. You know that a four -year college now costs at least $30,000 per year, including tuition, books, and room and board. The cost of sending a child to college has increased by 7 percent per year, and you believe this will be true for the next twelve years. What will a four year college education cost when your child is eighteen?

If you deposit $1,000 in an account that compounds quarterly at 8 percent interest, the amount of your account at the end of 5 years will be