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