Exam 5: Time Value of Money 2: Analyzing Annuity Cash Flows

If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due?

If the future value of an ordinary, 11-year annuity is $5,575 and interest rates are 5.5 percent, what is the future value of the same annuity due?

Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $550 in two weeks. What is the compound annual rate implied by this 10 percent rate charged for only two weeks?

Given a 6 percent interest rate, compute the present value of deposits made in years 1, 2, 3, and 4 of $1,200, $1,400, $1,400, and $1,500.

You wish to buy a $20,000 car. The dealer offers you a 5-year loan with an 8 percent APR. What are the monthly payments?

Payday loans are very short-term loans that charge very high interest rates. You can borrow $600 today and repay $675 in two weeks. What is the compound annual rate implied by this 12.5 percent rate charged for only two weeks?

When you get your credit card bill, it will offer a minimum payment, which

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan's effective annual rate (EAR)?

Which of the following will decrease the present value of an annuity?

If you start making $100 monthly contributions today and continue them for five years, what is their future value if the compounding rate is 10 percent APR? What is the present value of this annuity?

You wish to buy a $15,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments?

The length of time of the annuity is very important in accumulating wealth within an annuity. What other factor also has this effect?

In order to discount multiple cash flows to the present, one would use

Which of the following statements about compound frequency is not true?

A furniture company is offering a choice of deals. You can receive $100 cash back on the purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost per month of each deal?

The present value of annuity payments made far into the future is

Jasmine has decided that she wants to build enough retirement wealth that, if invested at 6 percent per year, will provide her with $3,000 of monthly income for 30 years. To date, she has saved nothing but she still has 25 years until she retires. Jasmine believes that she can earn 9 percent on her investments until she retires. How much money does she need to contribute per month to reach her goal?

You deposit $1,000 today and want to save $100 each month beginning one month from today. Your account earns a 5 percent annual interest rate. How long will it take you to accumulate $5,000?

The simple form of an annualized interest rate is called the annual percentage rate (APR). The effective annual rate (EAR) is a

What is the present value of a $600 annuity payment over 4 years if interest rates are 6 percent?