Answer and Step-by-step explanation:
Let's evaluate each statement:
1. If you need $1,500 at the end of four years to pay for a new computer, you would need to invest $1,183.50 today assuming a 6% interest rate compounded semi-annually.
To determine the amount needed to be invested today, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value (amount needed at the end of four years)
P = the principal (amount needed to be invested today)
r = the interest rate (6% or 0.06)
n = the number of times the interest is compounded per year (2, since it is compounded semi-annually)
t = the number of years (4)
Plugging in the values, we have:
1,500 = P(1 + 0.06/2)^(2*4)
Simplifying the equation, we find that P is approximately $1,183.50. So, the statement is true.
2. A six month, $6,000, 5% interest-bearing note issued on November 1 would have a maturity value of $5,850.
To find the maturity value of the note, we can use the formula:
Maturity value = Principal + (Principal * Interest Rate * Time)
Plugging in the values, we have:
Maturity value = 6,000 + (6,000 * 0.05 * 0.5)
Simplifying the equation, we find that the maturity value is $6,150, not $5,850. So, the statement is false.
3. The payment of a current liability with cash will increase a company's current ratio.
The current ratio is calculated by dividing current assets by current liabilities. When a current liability is paid with cash, it decreases both the current asset (cash) and current liability. Since both the numerator and denominator decrease by the same amount, the current ratio remains unchanged. So, the statement is false.
Based on the evaluation of each statement, the correct corresponding multiple-choice answer is: