Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

A $5,000 investment has doubled to $10,000 in ten years. How much longer will it take for the investment to reach $15,000 if it continues to earn the same rate?

What annual rate of return is earned on a $5,000 investment when it grows to $7,000 in six years?

You are offered a choice between $770 today and $815 one year from today. Assume that interest rates are 4 percent. Which do you prefer?

You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

The longer money can earn interest,

What is the present value of a $250 payment in one year when the discount rate is 6 percent?

The process of figuring out how much an amount that you expect to receive in the future is worth today is called

You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?

Moving cash flows from one point in time to another requires us to use

What annual rate of return is implied on a $5,000 loan taken next year when $7,700 must be repaid in year 8?

Compute the present value of $3,000 paid in four years using the following discount rates: 3 percent in year 1, 4 percent in year 2, 5 percent in year 3, and 6 percent in year 4.

An appliance store sells a TV for $1,200 and gives their customers a full three years to pay for the TV. If interest rates are 5 percent, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year.

What is the future value of $2,000 deposited for one year earning 6 percent interest rate annually?

A $2 million deposit earns 7 percent for 13 years. If the account earns 9 percent per year forever after that, how long will it take to grow to $5 million?

What is the value in year 15 of a $600 cash flow made in year 3 when the interest rates are 4 percent?

What is the value in year 6 of a $9,000 cash flow made in year 14 if interest rates are 7 percent in years "4 through 9" and increase to 10 percent after that?

You deposit $20,000 in an account that doubles in seven years. How many years will it take the account to double again if it earns 14 percent per year?

Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?