Exam 24: Time Value of Money Module

Match the diagrams with the concepts by writing the identifying letter of the diagram on the blank line to the left of the concept."VAL" represents the value to be calculated. $\text { Diagram of Concept }$ A.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > B.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > C.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > D.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > E.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > F.$\$ 1$ }\\ \_\_\_&3.&\text {Future value of an anmuity due of $\$ 1$ }\\ \_\_\_&4.&\text {Future value of an ordinary amuity of $\$ 1$ }\\ \_\_\_&5.&\text {Present value of an ordinary anmuity of $\$$ }\\ \_\_\_&6.&\text { Present value of an amurity clue of $\$ 1$ }\\ \end{array} " class="answers-bank-image d-inline" loading="lazy" > Concept \_\_\_ 1. Future value of \ 1 \_\_\_ 2. Present value of \ 1 \_\_\_ 3. Future value of an anmuity due of \ 1 \_\_\_ 4. Future value of an ordinary amuity of \ 1 \_\_\_ 5. Present value of an ordinary anmuity of \ \_\_\_ 6. Present value of an amurity clue of \ 1

The method of converting a future dollar amount into its present dollar value by removing the time value of money is called

Beginning December 31, 2010, ten equal annual withdrawals are to be made. Required: Using the appropriate tables, determine the equal annual withdrawals if $140, 000 is invested on January 1, 2010 at an interest rate of 10% compounded annually.

The future amount of $6, 000 deposited today and compounded semiannually at an 8% annual interest rate for four years would be

At the beginning of 2011, the Loretta Company issued 10-year bonds with a face value of $4, 000, 000 due on December 31, 2020.The company will accumulate a fund to retire these bonds at maturity.It will make ten annual deposits to the fund beginning on December 31, 2011.How much must the company deposit each year, assuming that it will earn 12% interest compounded annually?

An annuity is a

Teresa would like to retire on December 31, 2020, and take a trip around the world.In order to do this, she feels she must accumulate $200, 000 in her retirement account by that date.She is willing to deposit a certain amount each year into her retirement account, which earns 12% interest compounded annually.Teresa will make the first deposit on December 31, 2011, and the last deposit on December 31, 2020. Required: Determine the amount Teresa must deposit into her retirement account each year.Clearly label all work.

Compound interest is

The FASB concepts statement relating to cash flow information introduces the concept of expected cash flows when using present values for accounting measurements.Assume that the Smith Company determined that it has a 40% probability of receiving $10, 000 in one year but a 60% probability of receiving $10, 000 two years from now. Required: Using the FASB concepts, calculate the present value of the cash flows assuming a 12% interest rate compounded annually.

Glenda deposits $4, 000 every three months for five years.The first deposit is made on March 31, 2010, and the last deposit is made on December 31, 2014.The fund earns 16%, and interest is compounded quarterly.How much money will Glenda have on December 31, 2014, immediately after her last deposit? Factors for future value of an annuity of $1 are $\text { For Values of } n \text { and } i$ n=5;i=16\% n=20;I=4\% 6.8771 29.7781

The present values of ordinary annuities, annuities due, and deferred annuities were discussed in the textbook.Discuss the ways these three annuities are similar and dissimilar.

John desires to accumulate $13, 603.83 by December 1, 2012.To accumulate that sum, he will make six equal semiannual deposits of $2, 000, beginning on June 1, 2010, into a fund that earns interest compounded semiannually.What annual rate of interest must the fund provide to yield the desired sum?

You would like to deposit a sum of money today that would enable you to withdraw $1, 000 a year for five years.If the interest paid on the amount deposited is 10% compounded annually and if the first withdrawal is made one year from today, the formula you would use to determine the amount of the initial deposit is

Georgia has just won the state lottery.She will receive six equal annual amounts of $12, 000, beginning one year from today.Assuming an 8% interest rate compounded annually, the present value of those receipts today is

Using an appropriate compound interest table, solve the following question. Required: What is the future amount on December 31, 2020, of eleven deposits of $4, 000 each with the first deposit being made on December 31, 2010, and interest at 12% compounded annually?

Using the compound interest tables, solve the following questions. Required:

Using the compound interest tables, solve each of the following questions. Required:

On September 1, 2010, the Baker Company received $44, 940 from 4-Most Finance Company.To pay off this loan, the Baker Company will have to pay 4-Most $10, 000 each year for ten years.The first payment is due September 1, 2011.Which interest rate compounded annually is Baker paying on this loan?

Hillary Jones wants to know how much she must deposit today at 12% interest to provide three equal annual withdrawals of $10, 000, beginning one year from now.This is an example of the present value of

To compare the value of amounts received at different times in the future, dollar amounts