Exam 9: The Time Value of Money

The Swell Computer Company has developed a new line of desktop computers.It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years,and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year).At a 9% interest rate,what is the present value of these cash returns?

Canadian Coal Corporation (CCC)produced 420,000 metric tonnes of coal in 2015.If CCC's coal production in 2010 was 30,000 metric tonnes,what was CCC's average annual increase in production between 2010 and 2015?

Carol Thomas will pay out $6,000 at the end of the year 2,$8,000 at the end of year 3,and receive $10,000 at the end of year 4.With an interest rate of 13%,how much money does she need to have on hand today to meet her obligations?

Dr.J.wants to buy an IBM personal computer which will cost $2,788 four years from today.He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed.He can earn a 7% annual return.How much should he set aside?

Sharon Smith will receive $1,000,000 in 50 years.The discount rate is 14%.As an alternative she can receive $2,000 today.Which should she choose?

To determine the current worth of 4 annual payments of $1,000 at 4%,one would refer to a table for the present value of $1.

Mr.Fish wants to build a house in 10 years.He estimates that the total cost will be $170,000.If he can put aside $10,000 at the end of each year,what rate of return must he earn in order to have the amount needed?

As the interest rate increases,the present value of an amount to be received at the end of a fixed period:

A dollar today is worth more than a dollar to be received in the future because:

Joe Nautilus has $120,000 and wants to retire.What return must his money earn so he may receive annual benefits of $20,000 for the next 14 years?

Mr.Sullivan is borrowing $2 million to expand his business.The loan will be for 10 years at 12% on the declining balance,and will be repaid in equal quarterly installments.What will the quarterly payments be? At the end of the first year,how much interest will Mr.Sullivan have paid? By how much will he have reduced the principal?

Ruth H.wants to build a house in 12 years.She estimates that the total cost will be $350,000.If she can put aside $20,000 at the end of each year,what rate of return must she earn in order to have the amount needed,assuming annual compounding?

After 10 years,1,000 shares of stock originally purchased for $10/share was sold for $50/share.What was the annual yield on the investment? Choose the closest answer assuming annual compounding.

The time value of money is not a useful concept in determining the value of a bond or in capital investment decisions.

Dr.Russell wants to buy an expensive car which will cost $74,000 four years from today.He would like to set aside an equal amount at the end of each month in order to accumulate the amount needed.He can earn a 7% annual return.How much should he set aside?

In January,2005 Harold Black bought 100 shares of Country homes for $37.50 per share.He sold them in January,2015 for a total of $9,727.50.Calculate Harold's annual rate of return.

Gary Kiraly wants to buy a new Italian sports car in three years.The vehicle is expected to cost $80,000 at that time.If Gary should be so lucky as to find an investment yielding 12% over that three-year period,how much would he have to invest now in order to accumulate $80,000 at the end of the three years?

Cheryl Gold signed a 20-year,6% mortgage for $250,000.How much should the biweekly loan payments be? (Assume compounding biweekly.)

In determining the future value of an annuity,the final payment is not compounded at all.

As the time period until receipt increases,the present value of an amount at a fixed interest rate: