FIN 300 (TEST #2) QUESTIONS AND ANSWERS 2025

FIN 300 (TEST #2)

You deposit $10,000 in a bank and plan to keep it there for five years.
The bank pays 8% annual interest compounded continuously.
Calculate the future value at the end of five years.
$14,693
$15,000
$14,918
$14,500 - ANSWERS-$14,918


An annuity is best defined as:
-a series of payments for a specified period of time
-any series of payments
-a series of equal payments for a specified number of years
-a series of equal payments occurring at equal intervals for a
specified number of periods - ANSWERS-a series of equal payments
occurring at equal intervals for a specified number of periods


As the discount rate increases, the present value of a positive cash
flow to be received at a particular time in the future:


gets closer to zero
gets larger without limit
stays unchanged
gets smaller without limit - ANSWERS-gets closer to zero

, As the discount rate decreases (including negative values), the present
value of a positive cash flow to be received at a particular time in the
future:


gets closer to zero
gets larger without limit
stays unchanged
gets smaller without limit - ANSWERS-gets larger without limit


What is the present value of an annual annuity payment of $7,000
made for 12 years with a required return of 5% with the first payment
starting today?
$ 3,898
$65,145
$62,043
$11,200 - ANSWERS-$65,145


What is the present value of a semi-annual ordinary annuity payment
of $7,000 made for 12 years with a required annual return of 5%?
$ 65,145
$128,325
$125,195
$ 62,043 - ANSWERS-$125,195