ACCT 301 MIDTERM EXAM QUESTIONS WITH VERIFIED
ANSWERS
If you invest $54500 to earn 9% interest, which of the following compounding
approaches would return the lowest amount after one year?
Monthly.
Quarterly.
Daily.
Annually. - Answers - Annually.
An amount is deposited for fifteen years at 4%. If compounding occurs quarterly, then
the table value is found at
4% for 60 periods.
1% for 60 periods.
1% for fifteen periods.
4% for fifteen periods. - Answers - 1% for 60 periods.
4% compounding quarterly = 1% a quarter
15years x 4% = 60 periods
Peter invests $118000 in a 5-year certificate of deposit earning 3% at his local bank.
Which time value concept would be used to determine the maturity value of the
certificate?
Present value of an annuity due.
Future value of an ordinary annuity.
Future value of one.
Present value of one. - Answers - Future value of one.
Betty wants to know how much she should begin saving each month to fund her
retirement. What kind of problem is this?
Present value of one.
Future value of one.
Present value of an ordinary annuity.
Future value of an ordinary annuity. - Answers - Future value of an ordinary annuity
, Assume Bonita Industries deposits $91000 with First National Bank in an account
earning interest at 6% per annum, compounded semi-annually. How much will Bonita
have in the account after 4 years if interest is reinvested?
$91000.
$112840.
$114887.
$115276. - Answers - $115276
6% compounded semi-annually = 3%
4 years compounded semi-annually = 8 periods
(FUTURE VALUE OF $1 FACTOR TABLE)
Concord Corporation will receive $870000 in a future year. If the future receipt is
discounted at an interest rate of 10%, its present value is $446449. In how many years
is the $870000 received?
8 years
9 years
6 years
7 years - Answers - $446449 ÷ $870000 = 0.51316; 0.51316 is PV factor for 7 years.
Sunland Company will invest $101000 every December 31st for the next six years
(2020 - 2025). If Sunland will earn 9% on the investment, what amount will be in the
investment fund on December 31, 2025?
$493857.
$828242.
$453077
$759856. - Answers - $101000 × 7.52333 = $759856
Future Value of an Ordinary Annuity Table
Debra and Gary want to begin saving for their baby's college education. They estimate
that they will need $140000 in eighteen years. If they are able to earn 4% per annum,
how much must be deposited at the end of each of the next eighteen years to fund the
education?
$5459.
$11059.
$5908.
ANSWERS
If you invest $54500 to earn 9% interest, which of the following compounding
approaches would return the lowest amount after one year?
Monthly.
Quarterly.
Daily.
Annually. - Answers - Annually.
An amount is deposited for fifteen years at 4%. If compounding occurs quarterly, then
the table value is found at
4% for 60 periods.
1% for 60 periods.
1% for fifteen periods.
4% for fifteen periods. - Answers - 1% for 60 periods.
4% compounding quarterly = 1% a quarter
15years x 4% = 60 periods
Peter invests $118000 in a 5-year certificate of deposit earning 3% at his local bank.
Which time value concept would be used to determine the maturity value of the
certificate?
Present value of an annuity due.
Future value of an ordinary annuity.
Future value of one.
Present value of one. - Answers - Future value of one.
Betty wants to know how much she should begin saving each month to fund her
retirement. What kind of problem is this?
Present value of one.
Future value of one.
Present value of an ordinary annuity.
Future value of an ordinary annuity. - Answers - Future value of an ordinary annuity
, Assume Bonita Industries deposits $91000 with First National Bank in an account
earning interest at 6% per annum, compounded semi-annually. How much will Bonita
have in the account after 4 years if interest is reinvested?
$91000.
$112840.
$114887.
$115276. - Answers - $115276
6% compounded semi-annually = 3%
4 years compounded semi-annually = 8 periods
(FUTURE VALUE OF $1 FACTOR TABLE)
Concord Corporation will receive $870000 in a future year. If the future receipt is
discounted at an interest rate of 10%, its present value is $446449. In how many years
is the $870000 received?
8 years
9 years
6 years
7 years - Answers - $446449 ÷ $870000 = 0.51316; 0.51316 is PV factor for 7 years.
Sunland Company will invest $101000 every December 31st for the next six years
(2020 - 2025). If Sunland will earn 9% on the investment, what amount will be in the
investment fund on December 31, 2025?
$493857.
$828242.
$453077
$759856. - Answers - $101000 × 7.52333 = $759856
Future Value of an Ordinary Annuity Table
Debra and Gary want to begin saving for their baby's college education. They estimate
that they will need $140000 in eighteen years. If they are able to earn 4% per annum,
how much must be deposited at the end of each of the next eighteen years to fund the
education?
$5459.
$11059.
$5908.
