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

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You expect to receive $5,000 at graduation one year from now.Your plan is to invest this money at 6.5 percent, compounded annually, until you have $50,000.At that time, you plan to travel around the world.How long from now will it be until you can begin your travels?

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Western Bank pays 5 percent simple interest on its savings account balances, whereas Eastern Bank pays 5 percent compounded annually.If you deposited $6,000in each bank, how much more money would you earn from the Eastern Bank account at the end of 3 years?

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Which one of the following is the correct formula for the current value of $600 invested today at 5 percent interest for 6 years?

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