1.Loom, Inc. has outstanding a $1,000 face value bond with a 5% contract interest rate. The bond has 10 years remaining until maturity. If interest is paid annually, what is the value of the bond if the required rate of return is 6%?
- $926.39
- $1,000.00
- $1,046.95
- $962.39
2.What is the market value of a $1,000 bond, which has a coupon interest rate of 10% and will mature in 10 years if it is discounted at 15%? Interest is paid annually.
- $876.64
- $749.07
- $1,000.00
- $1,200.00
3.The amount you must deposit now in your savings account paying 5% interest, in order to accumulate $15,000 for your first tuition payment when you start college in 3 years is
- $12,594.30.
- $13,289.40.
- $13,350.
- $12,957.60.
4.Suppose you have a winning lottery ticket and you are given the option of accepting $7,000,000 three years from now or taking the present value of the $7,000,000 now. The sponsor of the prize uses a 6% discount rate. If you elect to receive the present value of the prize now, the amount you will receive is
$7,000,000.
$5,877,340.
$6,046,880.
$6,230,000.
5.Montz Company is considering investing in an annuity contract that will return $80,000 annually at the end of each year for 12 years. Montz has obtained the following values related to the time value of money to help in its planning process and compounded interest decisions.
Present value of 1 for 12 periods at 9%
0.35554
Future value of 1 for 12 periods at 9%
2.81267
Present value of an annuity of 1 for 12 periods at 9%
7.16073
Future value of an annuity of 1 for 12 periods at 9%
20.14072
To the closest dollar, what amount should Montz Company pay for this investment if it earns a 9% return?
$572,858
$1,185,014
$994,132
$1,611,258
6.Glover Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of interest of 8%, payable semiannually. The discount rate for such securities is 10%. How much can Glover expect to receive from the sale of these bonds?
$2,768,338
$3,000,000
$3,231,660
$3,243,315
7.Valente Company is about to issue $3,000,000 of 5-year bonds, with a contract rate of interest of 10%, payable semiannually. The discount rate for such securities is 8%. How much can Valente expect to receive from the sale of these bonds?
$3,000,000
$2,768,338
$3,243,315
$3,231,660