#1
What is the formula to calculate the future value of an annuity?
FV = PV(1 + r)^n
FV = PV / (1 + r)^n
FV = PV * (1 + r)^n
FV = PV / (1 - r)^n
#2
Which of the following is a characteristic of an ordinary annuity?
Payments are made at the beginning of each period
Payments are made at the end of each period
Payments vary over time
Payments are made at irregular intervals
#3
Which of the following is true regarding the time value of money?
A dollar received today is worth more than a dollar received in the future
A dollar received in the future is worth more than a dollar received today
A dollar received today is worth the same as a dollar received in the future
The time value of money applies only to annuities
#4
In financial management, what does the term 'discount rate' typically refer to?
The rate at which annuities are paid
The rate at which future cash flows are discounted to their present value
The rate at which dividends are distributed to shareholders
The rate at which interest is compounded annually
#5
Which of the following is NOT a factor affecting the present value of an annuity?
Interest rate
Number of periods
Type of annuity (ordinary or annuity due)
Amount of each payment
#6
What is the present value of an annuity if the payment is $1000 per year, the interest rate is 8%, and it lasts for 5 years?
$4,000
$4,486.25
$5,000
$5,000.80
#7
What is the future value of an annuity due with an annual payment of $2000, an interest rate of 6%, and it lasts for 10 years?
$23,801.43
$24,714.52
$26,472.58
$27,520.30
#8
Which formula is used to calculate the present value of an annuity?
PV = PMT * (1 - (1 / (1 + r)^n)) / r
PV = PMT / r
PV = PMT * ((1 + r)^n - 1) / r
PV = PMT * (1 + r)^n
#9
An annuity pays $500 per month for 5 years, with an interest rate of 6% per annum. What is the future value of this annuity?
$35,286.62
$37,487.29
$39,560.85
$41,510.23
#10
What is the future value of an ordinary annuity with annual payments of $2000, an interest rate of 5%, and it lasts for 8 years?
$17,189.40
$18,169.10
$19,147.56
$20,125.94
#11
Which of the following statements about perpetuities is true?
Perpetuities have a finite life span
The present value of a perpetuity is finite
Perpetuities involve a fixed number of periodic payments
Perpetuities continue indefinitely
#12
What is the present value of an annuity due with payments of $1500 per year, an interest rate of 10%, and it lasts indefinitely?
$15,000
$16,500
$17,500
$18,000
#13
Which of the following formulas is used to calculate the number of periods required to reach a desired future value in an annuity?
n = ln(FV/PV) / ln(1 + r)
n = log(FV/PV) / log(1 + r)
n = log(FV/PV) / log(r)
n = ln(FV/PV) / ln(r)
#14
An individual wants to have $100,000 in 10 years by saving into an annuity with an interest rate of 8%. How much should this individual save annually?
$8,465.25
$8,893.73
$9,352.55
$9,849.23
#15
An investment offers to pay $1,000 every year indefinitely, with the first payment starting one year from now. If the discount rate is 8%, what is the present value of this perpetuity?
$12,000
$10,000
$8,000
$6,000