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FIN--5203-1D2-FA-2021 - Finance for
Engineers
Started on Sunday, November 7, 2021, 9:46 PM
State Finished
Completed on Sunday, November 7, 2021, 11:16 PM
Time taken 1 hour 29 mins
Grade 16.50 out of 25.00 (66%)
Question 1
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For the diagram shown below, the respective values of n to calculate the present
worth in year 0 by the equation P0 = 100(P/A, 10%, n1)(P/F, 10%, n2) are
a.
n1 = 6, n2 = 1.
b.
n1 = 7, n2 = 1.
c.
n1 = 7, n2 = 2.
d.
n1 = 5, n2 = 2.
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Your answer is correct.
The correct answer is:
n1 = 6, n2 = 1.
Question 2
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When using compound interest factors in time value of money calculations
throughout our course, when using the F/A factor the F takes place _________ ,
and when using the P/A factor the P takes place _________ .
a.
one period after the last A; at the same time as the first A
b.
one period after the last A; one period before the first A
c.
at the same time as the last A; at the same time as the first A
d.
at the same time as the last A; one period before the first A
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Your answer is incorrect.
The correct answers are:
at the same time as the last A; one period before the first A,
one period after the last A; at the same time as the first A
Question 3
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An interest rate of 1% per month is the same as
a.
effective 12% per year, compounded monthly
b.
nominal 12% per year, compounded monthly
c.
nominal 12% per year, compounded annually
d.
effective 12% per year, compounded annually
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The correct answer is:
nominal 12% per year, compounded monthly
Question 4
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The present worth of a deposit of $1,000 every six months, starting 6 months
from now, for 10 years at a nominal interest rate of 10% per year, compounded
semiannually is represented by which of the following equations
a.
P = 1,000 (P/A, 10%, 10).
b.
P = 1,000 (P/A, 5%, 20).
c.
P = 1,000 (P/A, 10%, 20).
d.
P = 1,000 (P/A, 5%, 10).
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Your answer is correct.
The correct answer is:
P = 1,000 (P/A, 5%, 20).
Question 5
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If you make quarterly deposits for three years (beginning one quarter from now)
into an account that compounds interest at 1% per month, the value of n in
the F/A factor (for determining F at the end of the 3-year period), is
a.
4
b.
12
c.
3
d.
16
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The correct answer is:
12
Question 6
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In order to establish a contingency fund to replace equipment after unexpected
breakdowns, a manufacturer of thin-wall plastic bottles plans to deposit
$100,000 now and $150,000 two years from now into an investment account.
Assuming the account grows at 15% per year, the equation that
does not represent the future value of the account in year 5 is
a.
F = 100,000(F/P, 15%, 5) + 150,000(F/P, 15%, 3).
b.
F = [100,000 + 150,000(P/F, 15%, 2)](F/P, 15%, 5).
c.
F = 100,000(F/P, 15%, 5) + 150,000(F/P, 15%, 2).
d.
F = [100,000(F/P, 15%, 2) + 150,000](F/P, 15%, 3).
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Your answer is incorrect.
The correct answer is:
F = 100,000(F/P, 15%, 5) + 150,000(F/P, 15%, 2).
Question 7
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Assume you make weekly deposits of $200 starting one week from now into an
account that pays 13% per year, compounded weekly. If you want to know how
much you will have after four years, the value of i you should use in
the F/A factor is
a.
0.5%
b.
1%
c.
0.25%
d.
4%
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Your answer is correct.
The correct answer is:
0.25%
Question 8
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A uniform series of payments begins in year four and ends in year 11. If you use
the P/A factor with n = 8, the P value you get will be located in year
a.
3
b.
4
c.
0
d.
5
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Your answer is incorrect.
The correct answer is:
3
Question 9
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For the cash flows shown, you have been asked to calculate the present worth
(in year 0) using i = 10% per year. Which of the following solutions is not
correct?
a.
P = [200(P/A, 10%, 7) + 100(P/A, 10%, 3)(P/F, 10%, 4)](F/P, 10%, 1).
b.
P = [200(F/A, 10%, 7) + 100(F/A, 10%, 3)](P/F, 10%, 6).
c.
P = 200 + 200(P/A, 10%, 3) + 300(P/A, 10%, 3)(P/F, 10%, 3).
d.
P = 200(P/A, 10%, 4) + 300(P/A, 10%, 3)(F/P, 10%, 3).
Feedback
Your answer is incorrect.
The correct answer is:
P = 200(P/A, 10%, 4) + 300(P/A, 10%, 3)(F/P, 10%, 3).
Question 10
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A manufacturer of prototyping equipment wants to have $3,000,000 available
10 years from now so that a new product line can be initiated. If the company
plans to deposit money each year, starting one year from now, the equation that
represents how much the company is required to deposit each year at 10% per
year interest to have the $3,000,000 immediately after the last deposit is
a.
3,000,000 + 3,000,000(A/F, 10%, 10).
b.
3,000,000(A/F, 10%, 11).
c.
3,000,000(A/P, 10%, 10).
d.
3,000,000(A/F, 10%, 10).
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Your answer is correct.
The correct answer is:
3,000,000(A/F, 10%, 10).
Question 11
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE % SIGN, BUT
FORMATTED AS PERCENT WITH TWO DECIMAL PLACES, for instance if you
compute 0.03468 interest rate on your calculator then ENTER 3.47 AS YOUR
ANSWER. DO NOT ROUND IN YOUR CALCULATION STEPS (use calculator memory
functions) TO AVOID ROUNDING ERRORS. There is a little bit of tolerance built
into accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
Rambling Rotors Inc. needs help evaluating a possible investment project. The
project requires $62,000 investment today, and is expected to result in a one-
time cash inflow of $74,000 in 8 years. What is the implied annual rate or return
on the investment?
2.24
Answer:
Feedback
i = (FV/PV)^(1/n) - 1
i = (74,000 / 62,000)^(1/8) - 1 = 0.02236271771741 = 2.236271771741%
The correct answer is: 2.24
Question 12
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE $ SIGN AND
COMMA, BUT FORMATTED IN DOLLARS WITH TWO DECIMAL PLACES, for instance
if you compute $77,342.6478 then ENTER 77342.65 AS YOUR ANSWER. DO NOT
ROUND IN YOUR CALCULATION STEPS (use calculator memory functions) TO
AVOID ROUNDING ERRORS. There is a little bit of tolerance built into
accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
What is the present worth of the following stream of cash flows? An annuity that
starts 9 years from now and pays $3,000 per year for 6 years (6 payments of
$3,000). Assume 8% interest rate. (Note: nothing is paid in years 1-9. The first
payment is received at the end of year 10. The last payment is received at the
end of year 15.)
13868.64
Answer:
Feedback
You need to first calculate the present worth of the annuity, as of year 9, and
then, as a second step of your calculation, treat the calculated present worth of
the annuity as the future worth and calculate its present worth in year 0.
1. $3,000 x (P/A, 8%, 6) = close to 13868.638991884
2. 13868.638991884 / (1+0.08)^9 = 6937.7723312088
The correct answer is: 6937.77
Question 13
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE % SIGN, BUT
FORMATTED AS PERCENT WITH TWO DECIMAL PLACES, for instance if you
compute 0.03468 interest rate on your calculator then ENTER 3.47 AS YOUR
ANSWER. DO NOT ROUND IN YOUR CALCULATION STEPS (use calculator memory
functions) TO AVOID ROUNDING ERRORS. There is a little bit of tolerance built
into accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
You find from your account statement that the nominal interest rate associated
with your account is 10% per year, and that monthly compounding is being
applied to your account. What is the effective annual interest rate?
10.47
Answer:
Feedback
Effective Annual Rate = (1 + NOM/m)^m - 1,
where m is the number of compounding periods per year.
Thus,
Effective Annual Rate = (1 + 0.1/12)^12 - 1 = 0.1047130674413 =
10.47130674413%
The correct answer is: 10.47
Question 14
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GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE $ SIGN AND
COMMA, BUT FORMATTED IN DOLLARS WITH TWO DECIMAL PLACES, for instance
if you compute $77,342.6478 then ENTER 77342.65 AS YOUR ANSWER. DO NOT
ROUND IN YOUR CALCULATION STEPS (use calculator memory functions) TO
AVOID ROUNDING ERRORS. There is a little bit of tolerance built into
accepting/rejecting your answer, but if you round in your intermediate
calculations you may be too far off.
You deposit $3,000 into an investment account for 8 years. Assuming annual
rate of return of 6%, what will be the balance in your account at the end of year
8?
4781.54
Answer:
Feedback
The balance will be 3,000 x (1+0.06)^8 = 4781.5442235925
The correct answer is: 4781.54
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