1
,2
,Test Bank for Financial & Managerial Accounting, 20th Edition by Jan Williams
+i +i +i +i +i +i +i +i +i +i +i
Answers Included +i
Appendix B +i
1) Future value is the amount that must be invested today at a specific interest rate to receive a par
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ticular amount at some future date.
+i +i +i +i +i
⊚ true + i
⊚ false + i
2) The present value of an ordinary annuity is the amount that must be invested today at a spe
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
cific interest rate to in order to receive a particular amount at the end of a specified numb
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
er of future periods.
+i +i +i
⊚ true + i
⊚ false + i
3) The future value of an investment gradually increases toward its present value amount.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
4) Compound interest assumes that the interest earned on a particular investment is reinvested.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
5) Discounting a future value amount will determine its present value amount.
+i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
6) The lower the discount rate of an investment, the lower the present value of the investment.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
7) Annuities provide a series of cash flows to investors at regular intervals for a specified period of t
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ime.
⊚ true + i
⊚ false + i
3
, 8) The market price of a bond is equal to the discounted present value of its future cash flows.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
9) An ordinary annuity is the discounted present value of a series of cash flows made at the be
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ginning of each of a specified number of periods.
+i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
10) Interest rate percentages can be expressed in a variety of ways, including monthly, quarterly, se
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
miannually, and annually. +i +i
⊚ true + i
⊚ false + i
11) The difference between a present value and a related future value amount depends on (1) the dis
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
count rate and (2) the length of time over which the present value accumulates interest.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
12) The liability for post-
+i +i +i
retirement benefits is reported at the discounted present value of anticipated future cash outlays
+i +i +i +i +i +i +i +i +i +i +i +i +i
to retired employees in the form of pensions, health insurance premiums, etc.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
13) As discount rates used to value investments increase, the present values of those investments de
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
creases.
⊚ true + i
⊚ false + i
4
,2
,Test Bank for Financial & Managerial Accounting, 20th Edition by Jan Williams
+i +i +i +i +i +i +i +i +i +i +i
Answers Included +i
Appendix B +i
1) Future value is the amount that must be invested today at a specific interest rate to receive a par
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ticular amount at some future date.
+i +i +i +i +i
⊚ true + i
⊚ false + i
2) The present value of an ordinary annuity is the amount that must be invested today at a spe
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
cific interest rate to in order to receive a particular amount at the end of a specified numb
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
er of future periods.
+i +i +i
⊚ true + i
⊚ false + i
3) The future value of an investment gradually increases toward its present value amount.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
4) Compound interest assumes that the interest earned on a particular investment is reinvested.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
5) Discounting a future value amount will determine its present value amount.
+i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
6) The lower the discount rate of an investment, the lower the present value of the investment.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
7) Annuities provide a series of cash flows to investors at regular intervals for a specified period of t
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ime.
⊚ true + i
⊚ false + i
3
, 8) The market price of a bond is equal to the discounted present value of its future cash flows.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
9) An ordinary annuity is the discounted present value of a series of cash flows made at the be
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
ginning of each of a specified number of periods.
+i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
10) Interest rate percentages can be expressed in a variety of ways, including monthly, quarterly, se
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
miannually, and annually. +i +i
⊚ true + i
⊚ false + i
11) The difference between a present value and a related future value amount depends on (1) the dis
+i +i +i +i +i +i +i +i +i +i +i +i +i +i +i +i
count rate and (2) the length of time over which the present value accumulates interest.
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
12) The liability for post-
+i +i +i
retirement benefits is reported at the discounted present value of anticipated future cash outlays
+i +i +i +i +i +i +i +i +i +i +i +i +i
to retired employees in the form of pensions, health insurance premiums, etc.
+i +i +i +i +i +i +i +i +i +i +i +i
⊚ true + i
⊚ false + i
13) As discount rates used to value investments increase, the present values of those investments de
+i +i +i +i +i +i +i +i +i +i +i +i +i +i
creases.
⊚ true + i
⊚ false + i
4
