Intermediate Acct Review for Test 2
Exam 2 Ch 6
p 26. If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year? (you aren’t earning interest on interest)
a. Daily.
b. Monthly.
c. Quarterly.
d. Annually.
p41. An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at (adjust rate and number of periods!)
a. 8% for eight periods.
b. 2% for eight periods.
c. 8% for 32 periods.
d. 2% for 32 periods.
YOU WILL BE GIVEN A CHOICE OF (ABOUT 4) FACTORS p81. Angie invested $100,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually? (this is one lump sum) FV of sum 1.62889 n=10 i=5% 100,000 x 1.62889= $162,890
a. $155,134.
b. $161,050.
c. $162,890.
d. $177,156.
p87. What would you pay for an investment that pays you $3,000,000 after forty years? Assume that the relevant interest rate for this type of investment is 6%. PV of 1 0.09722 n=40 i=6%
a. $93,540.
b. $935,400.
c. $291,660.
d. $311,010.
***p90. Lucy and Fred want to begin saving for their baby's college education. They estimate that they will need $200,000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education? (is it annuity due or an ordinary due?) (it’s annuity due bc you have to make deposit at BEGINNING of each year) Pmt (FV of OA) = FV (adj.) n=18 i=6% factor = 30.90565 x 1.06 = 32.7599 Pmt(32.7599) = 200,000 Pmt = $6,105
a. $6,471.
b. $6,105.
c. $11,111.
d. $5,924.
Ch 7
p43. Why is the allowance method preferred over the direct write-off method of accounting for bad debts? (conceptual question) Balance
p 26. If you invest $50,000 to earn 8% interest, which of the following compounding approaches would return the lowest amount after one year? (you aren’t earning interest on interest)
a. Daily.
b. Monthly.
c. Quarterly.
d. Annually.
p41. An amount is deposited for eight years at 8%. If compounding occurs quarterly, then the table value is found at (adjust rate and number of periods!)
a. 8% for eight periods.
b. 2% for eight periods.
c. 8% for 32 periods.
d. 2% for 32 periods.
YOU WILL BE GIVEN A CHOICE OF (ABOUT 4) FACTORS p81. Angie invested $100,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually? (this is one lump sum) FV of sum 1.62889 n=10 i=5% 100,000 x 1.62889= $162,890
a. $155,134.
b. $161,050.
c. $162,890.
d. $177,156.
p87. What would you pay for an investment that pays you $3,000,000 after forty years? Assume that the relevant interest rate for this type of investment is 6%. PV of 1 0.09722 n=40 i=6%
a. $93,540.
b. $935,400.
c. $291,660.
d. $311,010.
***p90. Lucy and Fred want to begin saving for their baby's college education. They estimate that they will need $200,000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education? (is it annuity due or an ordinary due?) (it’s annuity due bc you have to make deposit at BEGINNING of each year) Pmt (FV of OA) = FV (adj.) n=18 i=6% factor = 30.90565 x 1.06 = 32.7599 Pmt(32.7599) = 200,000 Pmt = $6,105
a. $6,471.
b. $6,105.
c. $11,111.
d. $5,924.
Ch 7
p43. Why is the allowance method preferred over the direct write-off method of accounting for bad debts? (conceptual question) Balance