FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Time Value of Money-The Basics

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

The present value of a single future sum

A) increases as the number of discount periods increases.
B) is generally larger than the future sum.
C) depends upon the number of discount periods.
D) increases as the discount rate increases.

Correct Answer

verified

C

Question 2

Multiple Choice

Review LaterAdd Note

Review Later

If you want to have $1,200 in 27 months,how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10) .

A) $910
B) $890
C) $880
D) $860

Correct Answer

verified

Show Answer

Question 3

True/False

Review LaterAdd Note

As the discount rate increases,the present value of future cash flows increases.

You are considering two investments.Investment A yields 10% compounded quarterly.Investment B yields r% compounded semiannually.Both investments have equal annual yields.Find r.

What is the value of $750 invested at 7.5% compounded quarterly for 4.5 years (round to the nearest $1) ?

Money has a greater time value time value

For any number of compounding periods per year greater than 1,EAR will always be greater than the APR.

The time value of money is created by

If you want to have $1,700 in seven years,how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10) .

High discount rates favor

If you deposit $1,000 each year in a savings account earning 4%,compounded annually,how much will you have in 10 years?

The present value of a single sum

A friend plans to buy a big-screen TV/entertainment system and can afford to set aside $1,320 toward the purchase today.If your friend can earn 5.0%,compounded yearly,how much can your friend spend in four years on the purchase? Round off to the nearest $1.

If you place $50 in a savings account with an interest rate of 7% compounded weekly,what will the investment be worth at the end of five years (round to the nearest dollar) ?

How much money must be put into a bank account yielding 5.5% (compounded annually) in order to have $250 at the end of five years (round to nearest $1) ?

The present value of a future sum of money increases as the number of years before the payment is received increases.

What is the present value of $1,000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1) .

Sketch a timeline that represents an immediate investment of $20,000 with $25,000 to be received at the end of 4 years.

If you want to have $10,000 in 10 years,which of the following formulas represents how much money you must put in a savings account today? Assume that the savings account pays 6% and it is compounded monthly.

At 8% compounded annually,how long will it take $750 to double?