mba 621 exam Questions & Answers Verified 100%
Correct
Present Value (PV) Formula
PV = FV/(1+r)^n
At an annual interest rate of 7%, the present value of $5000 received in five years is closest
to:
$3,565
PV = 5000/(1+0.07)^5
Future Value (FV) Formula
FV = PV x (1+r)^t
If the current market rate of interest is 10%, then the future value of $500 today in 3 years is
closest to:
$666
FV = 500 x (1+0.10)^3
You are to receive $100 in one year from now, $200 in two years and $300 three years. If the
current market interest rate is 9%, the present value of these cash flows is
$492
100/(1.09)^1 = 91.74
200/(1.09)^2 = 168.34
300/(1.09)^3 = 231.66
, There is a cash inflow of $500 today and a cash outflow of $500 two years from now. If the
current market rate of interest is 8%, then the value of these cash flows as of year 1 is closest
to
$77
=500(1.08) - 500/1.08
You are to invest $1000 now, $2000 in one year, $3000 in two years and $4000 in three years
in a savings account with an interest of 8%. How much will you have in four years?
$11,6999
FV = 1000 x 1.08^4 + 2000 x 1.08^3 + 3000 x 1.08^2 + 4000 x 1.08
Present value of a Perpetuity Formula
PV = C/r
The British government has a consol bond outstanding that pays 100 in interest each year.
Assuming that the current interest rate in Great Britain is 5% and that you will receive your
first interest payment one year from now, then the value of the consol bond is closest to
2000
C/r = 100/0.05
If the current rate of interest is 8%, then the present value of an investment that pays $1000
per year and lasts 20 years is closest to
$9,818
PV = PMT x [1-{1/(1+r)^n} / r]
= 1000 x [1-{1/(1+0.08)^.08]
Correct
Present Value (PV) Formula
PV = FV/(1+r)^n
At an annual interest rate of 7%, the present value of $5000 received in five years is closest
to:
$3,565
PV = 5000/(1+0.07)^5
Future Value (FV) Formula
FV = PV x (1+r)^t
If the current market rate of interest is 10%, then the future value of $500 today in 3 years is
closest to:
$666
FV = 500 x (1+0.10)^3
You are to receive $100 in one year from now, $200 in two years and $300 three years. If the
current market interest rate is 9%, the present value of these cash flows is
$492
100/(1.09)^1 = 91.74
200/(1.09)^2 = 168.34
300/(1.09)^3 = 231.66
, There is a cash inflow of $500 today and a cash outflow of $500 two years from now. If the
current market rate of interest is 8%, then the value of these cash flows as of year 1 is closest
to
$77
=500(1.08) - 500/1.08
You are to invest $1000 now, $2000 in one year, $3000 in two years and $4000 in three years
in a savings account with an interest of 8%. How much will you have in four years?
$11,6999
FV = 1000 x 1.08^4 + 2000 x 1.08^3 + 3000 x 1.08^2 + 4000 x 1.08
Present value of a Perpetuity Formula
PV = C/r
The British government has a consol bond outstanding that pays 100 in interest each year.
Assuming that the current interest rate in Great Britain is 5% and that you will receive your
first interest payment one year from now, then the value of the consol bond is closest to
2000
C/r = 100/0.05
If the current rate of interest is 8%, then the present value of an investment that pays $1000
per year and lasts 20 years is closest to
$9,818
PV = PMT x [1-{1/(1+r)^n} / r]
= 1000 x [1-{1/(1+0.08)^.08]
