Exam 3: Applying Time Value Concepts

You have set a $100,000 goal for a college fund for your newborn child. You plan on having a fixed amount taken from your salary each month to meet this goal. The calculation to determine the monthly amount is called

Use the data in table 3.1 to answer the following question(s): Table 3.1 -Refer to Table 3.1 above. How much will you have if you deposit $1,000 each year for the next 5 years in an account paying 7%?

Assume you owe a large balance on your credit card and only pay the monthly minimum payment equal to 1% of the balance. If the annual interest rate on the credit card is 18%, how many years will it take you to pay off the balance assuming you do not make any additional charges to the card?

Present and future values concepts are not applied to which of the following?

Use the following two columns of items to answer the matching questions below: -compounding A)a business calculator that performs PV/FV calculations B)the process of earning interest on interest C)a series of equal payments received or paid at equal intervals D)a factor multiplied by today's savings to determine how the savings will accumulate over time

Your utility bill, which varies each month, is an example of an annuity.

Which of the following decisions would involve the use of the future value of $1? Select all that apply.

After completing this chapter, do you feel comfortable using your financial calculator for decisions? List several large financial decisions and how you could apply your newly acquired knowledge to make the best choice.

Aaron wants to put $200 per month into an individual retirement account at 15% for four years. What is he solving for using his financial calculator?

How many years will it take for $500 to grow to $1,039.50 if it is invested at 5% compounded annually?

In general, a dollar can typically buy more today than it can in one year.

If Art wants $35,000 in 10 years and can earn a 12% interest rate, how much does he need to invest today?

How much must you invest today at 8% interest in order to see your investment grow to $15,000 in 10 years?

A stream of equal payments either received or paid at equal time intervals is a(n) ________.

To determine how long it would take an investment to double at 10 percent, you could scan down the 10% column until you reach a factor of approximately 2.0 on the ________ table.

The process of obtaining present values is known as compounding.

Yogi Berra Jr. has agreed to play for the New York Mets for $4 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollars?

To compute how much you would need to save each year for the next 25 years to allow you to withdraw $20,000 for the following 30 years, you would need to use

The time value of money refers to

Use the data in table 3.1 to answer the following question(s): Table 3.1 -Refer to Table 3.1 above. How much will you need to deposit today in an account paying 7% if you wish to have $1,000 in 5 years?