Exam 5: Introduction to Valuation: the Time Value of Money

On your thirteenth birthday, you received $1,000 which you invested at 6.5% interest, compounded annually. Your investment is now worth $5,476. How old are you today?

One year ago, you invested $2,500. Today it is worth $2,789.50. What rate of interest did you earn?

Today, you earn a salary of $37,800. What will your annual salary be twelve years from now if you receive annual raises of 3.6%?

You just won the lottery and want to put some money away for your child's college education. College will cost $65,000 in 18 years. You can earn 8% compounded annually. How much do you Need to invest today?

Write a sentence explaining why present values decrease as the discount rate increases.

How long will it take for money to double at a rate of 6% compounded monthly?

What is the future value of $7,540 invested at 6.5% interest for seven years?

You will receive a $100,000 inheritance in 20 years. You can invest that money today at 6% compounded annually. What is the present value of your inheritance?

The future value will increase the higher the rate of interest.

Tom and Antonio both want to open savings accounts today. Tom wants to have $1,000 in his savings account six years from now. Antonio wants to have $1,000 in his savings account three years from now. Tom needs to deposit more money into his account today than does Antonio.

Twenty years ago, Max invested $10,000. Thirty years ago, Julie invested $5,000. Today, both Max and Julie's investments are each worth $35,000. Which one of the following statements is correct Concerning their investments? Assume that they will continue earning the same rate of return.

What is the present value of $36,800 to be received 6 years from today if the discount rate is 12%?

Your goal is to have $50,000 in cash to build a new home twelve years from now. Your plan is to make one deposit today to fund this goal. How much more will you have to deposit today to fund This goal if you can only earn 4% on your savings rather than 5%?

Seven years ago David deposited $10,000 into an account earning 5.25% compounded monthly. Recently, David was quoted by a home improvement firm a price of $15,000 to renovate his roof. Does David have enough cash on hand to pay for the roof?

Andy promises Opie that he will give him $5,000 upon his graduation from college at Mayberry U. How much must Andy invest today to make good on his promise, if Opie is expected to graduate in 12 years and Andy can earn 5% on his money?

Chia Burgers began operations by opening 115 restaurants in Western Canada at the end of its first year of operations. By the end of year 2, an additional 5 restaurants were opened. By the end of Year 3, there were 130 restaurants operational. At the end of year 5, there were 138 total Restaurants. Between the end of year 2 and the end of year 3, the number of eating establishments grew at a Rate of _________ compounded annually.

Tom and Antonio both want to open savings accounts today. Tom wants to have $1,000 in his savings account six years from now. Antonio wants to have $1,000 in his savings account three years from now. Antonio needs to deposit more money into his account today than does Tom.

Tom and Antonio both want to open savings accounts today. Tom wants to have $1,000 in his savings account six years from now. Antonio wants to have $1,000 in his savings account three years from now. Tom will need to deposit twice the amount of money today as Antonio.

The future value of a single sum will increase more rapidly when the interest rate decreases.

You want to have $10,000 saved ten years from now. How much less do you have to deposit today to reach this goal if you can earn 6% rather than 5% on your savings?