FIN test 2 multriple choice

Dollar amounts received at different points in time cannot be compared in absolute terms

True

A lender lends 10,000 which is repaid in annual payments of $2,000 in the 6 subsequent years. Which of the following shows the timeline of the loan from the lender’s perspective?

year 0 year 1 year 2 year 3 year 4 year 5 year 6

-$10,000 $2000 $2000 $2000 $2000 $2000 $2000

A tenet leases a building for $48,000 per year. She signs a 5 year rental agreement that states that she will pay $24,000 6 months for the next 5 years. Which of the followings is the timeline for her rental payments, assuming she makes the rental payment at the beginning of each 6 month period?

Date (years) 0 ½ 1 1½ 2 2½ 3 3½ 4 4½ 5

Cash flows(,000) -24 -24 -24 -24 -24 -24 -24 -24 -24 -24 -24

Samantha enters a rental agreement for bedroom furniture she will pay $60 per month for one year. Which of the following shows the timeline of her payments if the first payment if the first payments is a month from now?

Date(Months) 0 1 2 3 4 5 6 7 8 9 10 11 12

Cash flows 0 -$60 -$60 -$60 -$60 -$60 -$60 -$60 -$60 -$60 -$60 -$60 -$60

The timeline shown below best describes which of the following situations

Date(months) 0 1 3 4 5

Cash Flows -$250 -$250 -$250 -$250 -$250

You make payments of $250 per month for six months.

The timeline shown below best describes the cash flows of which of the following people

Date(years) 0 1 2 3 4

Cash Flows -$3500 $1000 $1000 $1000 $1000

Karen loans a friend $3500 The friend then pays back the loan in four annual installments of $1000

FV=

Ct

N=

number of years

I/Y=

% rate

PMT=

annual payments