1
,Test Bank For Financial & Managerial Accounting, 20th Edition By Jan Williams
Answers Included
1) Future Value Is The Amount That Must Be Invested Today At A Specific Interest Rate To
Receive A Particular Amount At Some Future Date.
⊚ True
⊚ False
2) The Present Value Of An Ordinary Annuity Is The Amount That Must Be Invested
Today At A Specific Interest Rate To In Order To Receive A Particular Amount At
The End Of A Specified Number Of Future Periods.
⊚ True
⊚ False
3) The Future Value Of An Investment Gradually Increases Toward Its Present Value Amount.
⊚ True
⊚ False
4) Compound Interest Assumes That The Interest Earned On A Particular Investment Is Reinvested.
⊚ True
⊚ False
5) Discounting A Future Value Amount Will Determine Its Present Value Amount.
⊚ True
⊚ False
6) The Lower The Discount Rate Of An Investment, The Lower The Present Value Of The Investment.
⊚ True
⊚ False
7) Annuities Provide A Series Of Cash Flows To Investors At Regular Intervals For A Specified
Period Of Time.
⊚ True
⊚ False
2
,8) The Market Price Of A Bond Is Equal To The Discounted Present Value Of Its Future Cash Flows.
⊚ True
⊚ False
9) An Ordinary Annuity Is The Discounted Present Value Of A Series Of Cash Flows
Made At The Beginning Of Each Of A Specified Number Of Periods.
⊚ True
⊚ False
10) Interest Rate Percentages Can Be Expressed In A Variety Of Ways, Including Monthly,
Quarterly, Semiannually, And Annually.
⊚ True
⊚ False
11) The Difference Between A Present Value And A Related Future Value Amount Depends On
(1) The Discount Rate And (2) The Length Of Time Over Which The Present Value
Accumulates Interest.
⊚ True
⊚ False
12) The Liability For Post-Retirement Benefits Is Reported At The Discounted Present Value Of
Anticipated Future Cash Outlays To Retired Employees In The Form Of Pensions, Health
Insurance Premiums, Etc.
⊚ True
⊚ False
13) As Discount Rates Used To Value Investments Increase, The Present Values Of Those
Investments Decreases.
⊚ True
⊚ False
3
,14) Present Values Of Future Cash Flows Can Only Be Calculated Through The Application Of
Complex Formulas.
⊚ True
⊚ False
15) The Future Value Of An Investment’s Present Value Today Can Be Determined By
Multiplying Its Present Value By The Appropriate Factor Obtained From A Future Value
Table.
⊚ True
⊚ False
16) The Future Value Of An Ordinary Annuity Can Be Determined By Multiplying The
Periodic Annuity Payment By The Appropriate Factor Obtained From A Future Value
Of An Ordinary Annuity Table.
⊚ True
⊚ False
17) The Present Value Of An Investment That Promises To Pay A Single Lump-Sum Amount In
The Future Can Be Calculated By Multiplying The Future Lump-Sum Amount By The
Appropriate Factor Obtained From A Present Value Of $1 Table.
⊚ True
⊚ False
18) The Present Value Of An Ordinary Annuity Is Calculated By Multiplying The Annuity’s
Periodic Cash Payments By The Appropriate Factor Obtained From A Future Value Of An
Ordinary Annuity Table.
⊚ True
⊚ False
19) If Larraine Invested $33,000 At 6% On Her 20th Birthday, How Much Would Larraine
Have On Her 40th Birthday?
A) $105,831.00
B) $100,803.28
C) $121,824.94
D) $131,903.58
4
,20) If Larraine Invested $24,000 At 5% On Her 20th Birthday, How Much Would Larraine
Have On Her 40th Birthday?
A) $63,672.00
B) $73,293.60
C) $79,358.28
D) $60,646.83
21) If Jonathan Invests $41,000 Today For 10 Years And It Grows To $165,886, What Rate Of
Interest Has Jonathan Received?
A) 10%
B) 30%
C) 15%
D) 20%
22) If Jonathan Invests $44,000 Today For 6 Years And It Grows To $69,828, What Rate Of
Interest Has Jonathan Received?
A) 12%
B) 6%
C) 8%
D) 16%
23) How Much Must Rashad Invest Today In Order To Have $25,200 In 9 Years Assuming
15% Interest Compounded Annually?
A) $7,156.80
B) $16,800.00
C) $23,066.24
D) $17,842.00
24) How Much Must Rashad Invest Today In Order To Have $15,000 In 8 Years Assuming
12% Interest Compounded Annually?
A) $6,060.00
B) $10,000.00
C) $19,531.25
D) $11.520.00
5
,25) Your Grandmother Wishes To Give You A Trip To Belize When You Graduate From
College In Four Years. She Estimates The Trip Will Cost $4,000. How Much Must She
Invest Now At 6.0% To Accumulate Enough For You To Take This Trip?
A) $4,000.00
B) $3,168.00
C) $6,336.20
D) $5,050.41
26) Your Grandmother Wishes To Give You A Trip To Belize When You Graduate From
College In Two Years. She Estimates The Trip Will Cost $4,100. How Much Must She
Invest Now At 5% To Accumulate Enough For You To Take This Trip?
A) $4,520.30
B) $3,718.70
C) $7,437.60
D) $4,100.00
27) A Scholarship Fund Has $75,000 To Invest Now To Provide Scholarships To High
School Students. They Want To Have At Least $150,000 In 9 Years. What Rate Of
Interest Must They Invest This Money At To Reach Their Goal?
A) 7%
B) 8%
C) 10%
D) 11%
28) If Lehigh Invests $525 At The End Of Each Year For Five Years At 15%, How Much Will
He Have At The End Of The Five Years?
A) $1,079.40
B) $3,539.55
C) $5,397.00
D) $1,721.57
6
,29) If Lehigh Invests $325 At The End Of Each Year For Six Years At 10%, How Much Will He
Have At The End Of The Sixth Year?
A) $698.10
B) $2,507.70
C) $4,188.60
D) $1,167.46
30) The Difference Between The Present Value And The Future Value Of A Sum Of Money
Depends Upon:
A) The Rate Of Interest.
B) The Length Of Time.
C) The Rate Of Interest And The Length Of Time.
D) Neither The Rate Of Interest Nor The Length Of Time.
31) The Future Value Of An Annuity Is:
A) Always More Than The Present Value.
B) Always Less Than The Present Value.
C) Equal To The Present Value.
D) Double The Present Value.
32) The Present Value Of An Investment Is:
A) The Amount An Investor Would Pay Today To Receive A Certain Amount In The Future.
B) The Amount An Investor Would Pay Today Plus The Interest The Investor Would
Expect To Receive A Certain Amount In The Future.
C) The Amount An Investor Would Pay Today Less The Interest The Investor Requires.
D) 90% Of The Future Value Of An Investment.
33) Judy Bright Has Just Won The Lottery. She Can Elect To Receive Her Winnings In Equal
Payments Of $200,000 A Year For The Next Ten Years On December 31 Or To Receive
$2,000,000 Immediately. If The Current Interest Rate Is 6%, Which Choice Will Provide The
Highest Amount?
A) Receiving $2,000,000 Immediately.
B) Taking Equal Payments For 10 Years.
C) It Does Not Matter Since Either Choice Provides The Same Amount.
D) Refusing To Accept The Winnings Since It Is Not Enough.
7
,34) To Determine The Present Value Of A Single Amount To Be Received Or Paid At A Future
Time You Need To Know All Of The Following Except:
A) The Interest Rate Or Discount Rate.
B) The Number Of Periods.
C) The Future Value.
D) The Time Between Periods.
35) To Determine The Amount To Be Deposited In A Bank Today To Grow To $5,000 Three
Years From Now At 7%, Which Table Should Be Used?
A) Present Value Of $1.
B) Future Value Of $1.
C) Present Value Of An Annuity Of $1.
D) No Table Is Required; Just Multiply $5,000 By 1.07 (Or 1 + 7%).
36) Antoni Wants To Buy A New Car In 4 Years. He Knows That He Can Earn 10% Interest
Compounded Semi-Annually. How Much Must He Deposit Now In Order To Have $26,000
At The End Of 4 Years?
A) $21,390.20
B) $17,602.00
C) $38,413.96
D) $31.603.26
37) Compound Interest:
A) Is Interest Only On The Principal Amount For Several Years.
B) Is Interest On The Principal And Previously Earned Interest.
C) Is Interest Only On Previous Interest Excluding The Principal.
D) Is Equal To Simple Interest Received For Several Years.
38) Financial Instruments Do Not Include:
A) Contracts That Call For Receipts Or Payment Of Cash.
B) Equity Investment In Another Business.
C) Cash.
D) Tangible Long-Term Assets.
8
,39) Most Long-Term Financial Instruments Are Recorded At Their:
A) Future Values.
B) Present Values Plus Interest.
C) Present Values Less Interest.
D) Present Values.
40) A Note That Does Not Include An Interest Rate Should Be Recorded At:
A) Its Face Amount If The Difference Between Face And Present Value Is Material.
B) Its Present Value If The Difference Between Face And Present Value Is Material.
C) Its Face Amount At All Times.
D) Its Present Value At All Times.
41) Ibrahim Invested $10,000 At 8% Simple Interest For 5 Years. How Much More Would He
Have Received If He Had Received Compound Interest Annually At The Same Rate?
A) $4,000
B) $4,693
C) $690
D) $400
42) The Present Value Of A Cash Amount:
A) Is Always Less Than The Future Value.
B) Is Always More Than The Future Value.
C) Is The Same As The Future Value.
D) Has No Relationship To The Future Value Because Of Inherent Uncertainties.
43) If Sofia Receives $31,000 As A Gift And Invests It At 20% Compounded Semi-
Annually, How Much Will She Have At The End Of Two Years?
A) $31,000.00
B) $45,384.00
C) $36,425.00
D) $9,973.23
9
, 44) If Sofia Receives $13,000 As A Gift And Invests It At 24% Compounded Semi-
Annually, How Much Will She Have At The End Of Five Years?
A) $17,329.00
B) $40,378.00
C) $13,000.00
D) $4,185.45
45) The Time Value Of Money Is Based On The Premise That The:
A) Value Of Money In The Future Equals The Interest Received In The Present.
B) Value Of Money In The Future Will Be Greater Than An Amount Available Today.
C) Value Of Money At Present Over Some Length Of Time Will Be Reduced By Inflation.
D) Future Value Of Money Will Become The Current Value As Time Passes.
46) Ailey Invests $200 At The End Of Each Year In A Savings Account That Pays 5%
Annually. How Much Will She Have At The End Of 5 Years?
A) $1,000.00
B) $1,105.20
C) $1,077.50
D) $1,082.37
47) A Future Amount Is The Dollar Amount To Which A Present Value Will
Over Time.
A) Diminish
B) Accumulate
C) Disappear
D) Maintain
10
,Test Bank For Financial & Managerial Accounting, 20th Edition By Jan Williams
Answers Included
1) Future Value Is The Amount That Must Be Invested Today At A Specific Interest Rate To
Receive A Particular Amount At Some Future Date.
⊚ True
⊚ False
2) The Present Value Of An Ordinary Annuity Is The Amount That Must Be Invested
Today At A Specific Interest Rate To In Order To Receive A Particular Amount At
The End Of A Specified Number Of Future Periods.
⊚ True
⊚ False
3) The Future Value Of An Investment Gradually Increases Toward Its Present Value Amount.
⊚ True
⊚ False
4) Compound Interest Assumes That The Interest Earned On A Particular Investment Is Reinvested.
⊚ True
⊚ False
5) Discounting A Future Value Amount Will Determine Its Present Value Amount.
⊚ True
⊚ False
6) The Lower The Discount Rate Of An Investment, The Lower The Present Value Of The Investment.
⊚ True
⊚ False
7) Annuities Provide A Series Of Cash Flows To Investors At Regular Intervals For A Specified
Period Of Time.
⊚ True
⊚ False
2
,8) The Market Price Of A Bond Is Equal To The Discounted Present Value Of Its Future Cash Flows.
⊚ True
⊚ False
9) An Ordinary Annuity Is The Discounted Present Value Of A Series Of Cash Flows
Made At The Beginning Of Each Of A Specified Number Of Periods.
⊚ True
⊚ False
10) Interest Rate Percentages Can Be Expressed In A Variety Of Ways, Including Monthly,
Quarterly, Semiannually, And Annually.
⊚ True
⊚ False
11) The Difference Between A Present Value And A Related Future Value Amount Depends On
(1) The Discount Rate And (2) The Length Of Time Over Which The Present Value
Accumulates Interest.
⊚ True
⊚ False
12) The Liability For Post-Retirement Benefits Is Reported At The Discounted Present Value Of
Anticipated Future Cash Outlays To Retired Employees In The Form Of Pensions, Health
Insurance Premiums, Etc.
⊚ True
⊚ False
13) As Discount Rates Used To Value Investments Increase, The Present Values Of Those
Investments Decreases.
⊚ True
⊚ False
3
,14) Present Values Of Future Cash Flows Can Only Be Calculated Through The Application Of
Complex Formulas.
⊚ True
⊚ False
15) The Future Value Of An Investment’s Present Value Today Can Be Determined By
Multiplying Its Present Value By The Appropriate Factor Obtained From A Future Value
Table.
⊚ True
⊚ False
16) The Future Value Of An Ordinary Annuity Can Be Determined By Multiplying The
Periodic Annuity Payment By The Appropriate Factor Obtained From A Future Value
Of An Ordinary Annuity Table.
⊚ True
⊚ False
17) The Present Value Of An Investment That Promises To Pay A Single Lump-Sum Amount In
The Future Can Be Calculated By Multiplying The Future Lump-Sum Amount By The
Appropriate Factor Obtained From A Present Value Of $1 Table.
⊚ True
⊚ False
18) The Present Value Of An Ordinary Annuity Is Calculated By Multiplying The Annuity’s
Periodic Cash Payments By The Appropriate Factor Obtained From A Future Value Of An
Ordinary Annuity Table.
⊚ True
⊚ False
19) If Larraine Invested $33,000 At 6% On Her 20th Birthday, How Much Would Larraine
Have On Her 40th Birthday?
A) $105,831.00
B) $100,803.28
C) $121,824.94
D) $131,903.58
4
,20) If Larraine Invested $24,000 At 5% On Her 20th Birthday, How Much Would Larraine
Have On Her 40th Birthday?
A) $63,672.00
B) $73,293.60
C) $79,358.28
D) $60,646.83
21) If Jonathan Invests $41,000 Today For 10 Years And It Grows To $165,886, What Rate Of
Interest Has Jonathan Received?
A) 10%
B) 30%
C) 15%
D) 20%
22) If Jonathan Invests $44,000 Today For 6 Years And It Grows To $69,828, What Rate Of
Interest Has Jonathan Received?
A) 12%
B) 6%
C) 8%
D) 16%
23) How Much Must Rashad Invest Today In Order To Have $25,200 In 9 Years Assuming
15% Interest Compounded Annually?
A) $7,156.80
B) $16,800.00
C) $23,066.24
D) $17,842.00
24) How Much Must Rashad Invest Today In Order To Have $15,000 In 8 Years Assuming
12% Interest Compounded Annually?
A) $6,060.00
B) $10,000.00
C) $19,531.25
D) $11.520.00
5
,25) Your Grandmother Wishes To Give You A Trip To Belize When You Graduate From
College In Four Years. She Estimates The Trip Will Cost $4,000. How Much Must She
Invest Now At 6.0% To Accumulate Enough For You To Take This Trip?
A) $4,000.00
B) $3,168.00
C) $6,336.20
D) $5,050.41
26) Your Grandmother Wishes To Give You A Trip To Belize When You Graduate From
College In Two Years. She Estimates The Trip Will Cost $4,100. How Much Must She
Invest Now At 5% To Accumulate Enough For You To Take This Trip?
A) $4,520.30
B) $3,718.70
C) $7,437.60
D) $4,100.00
27) A Scholarship Fund Has $75,000 To Invest Now To Provide Scholarships To High
School Students. They Want To Have At Least $150,000 In 9 Years. What Rate Of
Interest Must They Invest This Money At To Reach Their Goal?
A) 7%
B) 8%
C) 10%
D) 11%
28) If Lehigh Invests $525 At The End Of Each Year For Five Years At 15%, How Much Will
He Have At The End Of The Five Years?
A) $1,079.40
B) $3,539.55
C) $5,397.00
D) $1,721.57
6
,29) If Lehigh Invests $325 At The End Of Each Year For Six Years At 10%, How Much Will He
Have At The End Of The Sixth Year?
A) $698.10
B) $2,507.70
C) $4,188.60
D) $1,167.46
30) The Difference Between The Present Value And The Future Value Of A Sum Of Money
Depends Upon:
A) The Rate Of Interest.
B) The Length Of Time.
C) The Rate Of Interest And The Length Of Time.
D) Neither The Rate Of Interest Nor The Length Of Time.
31) The Future Value Of An Annuity Is:
A) Always More Than The Present Value.
B) Always Less Than The Present Value.
C) Equal To The Present Value.
D) Double The Present Value.
32) The Present Value Of An Investment Is:
A) The Amount An Investor Would Pay Today To Receive A Certain Amount In The Future.
B) The Amount An Investor Would Pay Today Plus The Interest The Investor Would
Expect To Receive A Certain Amount In The Future.
C) The Amount An Investor Would Pay Today Less The Interest The Investor Requires.
D) 90% Of The Future Value Of An Investment.
33) Judy Bright Has Just Won The Lottery. She Can Elect To Receive Her Winnings In Equal
Payments Of $200,000 A Year For The Next Ten Years On December 31 Or To Receive
$2,000,000 Immediately. If The Current Interest Rate Is 6%, Which Choice Will Provide The
Highest Amount?
A) Receiving $2,000,000 Immediately.
B) Taking Equal Payments For 10 Years.
C) It Does Not Matter Since Either Choice Provides The Same Amount.
D) Refusing To Accept The Winnings Since It Is Not Enough.
7
,34) To Determine The Present Value Of A Single Amount To Be Received Or Paid At A Future
Time You Need To Know All Of The Following Except:
A) The Interest Rate Or Discount Rate.
B) The Number Of Periods.
C) The Future Value.
D) The Time Between Periods.
35) To Determine The Amount To Be Deposited In A Bank Today To Grow To $5,000 Three
Years From Now At 7%, Which Table Should Be Used?
A) Present Value Of $1.
B) Future Value Of $1.
C) Present Value Of An Annuity Of $1.
D) No Table Is Required; Just Multiply $5,000 By 1.07 (Or 1 + 7%).
36) Antoni Wants To Buy A New Car In 4 Years. He Knows That He Can Earn 10% Interest
Compounded Semi-Annually. How Much Must He Deposit Now In Order To Have $26,000
At The End Of 4 Years?
A) $21,390.20
B) $17,602.00
C) $38,413.96
D) $31.603.26
37) Compound Interest:
A) Is Interest Only On The Principal Amount For Several Years.
B) Is Interest On The Principal And Previously Earned Interest.
C) Is Interest Only On Previous Interest Excluding The Principal.
D) Is Equal To Simple Interest Received For Several Years.
38) Financial Instruments Do Not Include:
A) Contracts That Call For Receipts Or Payment Of Cash.
B) Equity Investment In Another Business.
C) Cash.
D) Tangible Long-Term Assets.
8
,39) Most Long-Term Financial Instruments Are Recorded At Their:
A) Future Values.
B) Present Values Plus Interest.
C) Present Values Less Interest.
D) Present Values.
40) A Note That Does Not Include An Interest Rate Should Be Recorded At:
A) Its Face Amount If The Difference Between Face And Present Value Is Material.
B) Its Present Value If The Difference Between Face And Present Value Is Material.
C) Its Face Amount At All Times.
D) Its Present Value At All Times.
41) Ibrahim Invested $10,000 At 8% Simple Interest For 5 Years. How Much More Would He
Have Received If He Had Received Compound Interest Annually At The Same Rate?
A) $4,000
B) $4,693
C) $690
D) $400
42) The Present Value Of A Cash Amount:
A) Is Always Less Than The Future Value.
B) Is Always More Than The Future Value.
C) Is The Same As The Future Value.
D) Has No Relationship To The Future Value Because Of Inherent Uncertainties.
43) If Sofia Receives $31,000 As A Gift And Invests It At 20% Compounded Semi-
Annually, How Much Will She Have At The End Of Two Years?
A) $31,000.00
B) $45,384.00
C) $36,425.00
D) $9,973.23
9
, 44) If Sofia Receives $13,000 As A Gift And Invests It At 24% Compounded Semi-
Annually, How Much Will She Have At The End Of Five Years?
A) $17,329.00
B) $40,378.00
C) $13,000.00
D) $4,185.45
45) The Time Value Of Money Is Based On The Premise That The:
A) Value Of Money In The Future Equals The Interest Received In The Present.
B) Value Of Money In The Future Will Be Greater Than An Amount Available Today.
C) Value Of Money At Present Over Some Length Of Time Will Be Reduced By Inflation.
D) Future Value Of Money Will Become The Current Value As Time Passes.
46) Ailey Invests $200 At The End Of Each Year In A Savings Account That Pays 5%
Annually. How Much Will She Have At The End Of 5 Years?
A) $1,000.00
B) $1,105.20
C) $1,077.50
D) $1,082.37
47) A Future Amount Is The Dollar Amount To Which A Present Value Will
Over Time.
A) Diminish
B) Accumulate
C) Disappear
D) Maintain
10
