Exam 3: Applying Time Value Concepts

In order to maximize the use of your money, you may want to delay payment of your bills slightly beyond their due dates.

To save for her newborn son's college education, Kelli Peterson will invest $1,500 at the end of each year for the next 18 years. The interest rate she expects to earn on her investment is 9%. How much money will she have saved by the time her son turns 18?

Which stream of cash flows is not an example of an annuity?

Which of the following decisions would involve the use of the present value of a $1 ordinary annuity table?

The difference between an ordinary annuity and an annuity due is that with an annuity due the payments occur at the ________ of each period.

The time value of money implies that a dollar received today is worth ________ a dollar received tomorrow.

The time value of money can be applied to all of the following, except

If Lucky Louie won a lottery and chose to take $10,000,000 ten years from now (disregarding taxes), what would be the equivalent amount today, at 6% per annum?

The future value of an ordinary annuity assumes that the payments are received

The process of obtaining present values is known as discounting.

An annuity due differs from an ordinary annuity in that the payments occur at the beginning of the period instead of at the end of the period.

Don wants to know how much he needs to save every year to amass $15,000 in five years at a 5% interest rate. What is he calculating using his financial calculator?

The concept of time value of money is important to financial decision making because

Lisa wants to know how much savings she would accumulate in 15 years if she saves $2,000 per year and her savings earns 4% per year. She needs to determine the

The concept that a dollar received today has more value than a dollar received in the future because of the interest it can earn is called the ________.

Use the following two columns of items to answer the matching questions below: -future value interest factor 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

The earning of interest on interest over time is called

To determine how much you must save each year to have enough for your daughter's college education, you would use the present value of $1 tables.

Susie wants to know how much she needs to save today to have $5,000 in five years. Which of the following tables should she use?

If Joe has $5,600 today and invests it at a 10% interest rate, how much will he have in 12 years?