Exam 4: Introduction to Valuation: the Time Value of Money

Today, Georgia is investing $24,000 at 5.5 percent, compounded annually, for 6 years.How much additional income could she earn if she had invested this amount at 6.5 percent, compounded annually?

Marcos is investing $5 today at 7 percent interest so he can have $35 later.This $35 is referred to as the:

All else held constant, the future value of a lump-sum investment will decrease if the:

Lucas expects to receive a sales bonus of $7,500 one year from now.The process of determining how much that bonus is worth today is called:

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

Isaac only has $1,090 today but needs $1,979 to buy a new computer.How long will he have to wait to buy the computer if he earns 5.4 percent compounded annually on his savings? Assume the price of the computer remains constant.

South Central Bank pays 2.5 percent interest, compounded annually, on its savings accounts.Northern Bank pays 2.5 percent simple interest on its savings accounts.You want to deposit sufficient funds today so that you will have $1,500 in your account 2 years from today.The amount you must deposit today:

When you were born, your parents opened an investment account in your name and deposited $1,500 into the account.The account has earned an average annual rate of return of 5.3percent.Today, the account is valued at $42,856.How old are you?

Stephen claims that he invested $6,000 six years ago and that this investment is worth $28,700 today.For this to be true, what annual rate of return did he have to earn? Assume the interest compounded annually.

Kendall is investing $3,333 today at 3 percent annual interest for three years.Which one of the following will increase the future value of that amount?

Which one of the following is a correct statement, all else held constant?

Stacey deposits $5,000 into an account that pays 2 percent interest, compounded annually.At the same time, Kurt deposits $5,000 into an account paying 3.5 percent interest, compounded annually.At the end of three years:

Jamie earned $14 in interest on her savings account last year.She has decided to leave the $14 in her account so that she can earn interest on the $14 this year.The interest earned on last year's interest earnings is called:

Jessica invested $2,000 today in an investment that pays 6.5 percent annual interest.Which one of the following statements is correct, assuming all interest is reinvested?

You have $300 today and want to triple your money in 5 years.What interest rate must you earn if the interest is compounded annually?

Suppose that in 2015, a $10 silver certificate from 1898 sold for $11,700.For this to have been true, what would the annual increase in the value of the certificate have been?

You and your sister are planning a large anniversary party 3 years from today for your parents' 50th wedding anniversary.You have estimated that you will need $6,500 for this party.You can earn 2.6 percent compounded annually on your savings.How much would you and your sister have to deposit today in one lump sum to pay for the entire party?

Jenny needs to borrow $5,500 for four years.The loan will be repaid in one lump sum at the end of the loan term.Which one of the following interest rates is best for Jenny?

You are scheduled to receive $5,000 in two years.When you receive it, you will invest it at 6.5 percent per year.How much will your investment be worth eight years from now?

Katlyn needs to invest $5,318 today in order for her savings account to be worth $8,000 six years from now.Which one of the following terms refers to the $5,318?