Exam 3: Understanding and Appreciating the Time Value of Money

Sly's Used Cars just sold you a clunker (you need it to get to class on time).You financed the $4,728.48 purchase price for 24 months.They said your payment would be $250.What interest rate did they charge you (assume monthly compounding)?

Rasheed can afford a monthly car payment of $550 for 72 months at an annual interest rate of 7.5 percent.Which of the following is closest to the amount he will be able to borrow for a new car?

What is the annual interest rate earned on a deposit that grew from $250 to $502.84 over the last 5 years?

Small changes in the interest rate can have a dramatic impact on future values.

Samantha Jee put $3,000 into a mutual fund yielding a 12 percent annual rate of return.Using the Rule of 72,calculate approximately how long it will take for the investment to double in value.

You invest $1,000 at age 20 at an annual rate of return of 12%.By the time you are 62 you will have amassed approximately

What are some practical uses of present and future values?

List at least five common examples of annuities.

By the Rule of 72,what annual interest rate would be required to turn $100 into $200 in approximately six years?

Assuming that you can afford a car payment of $400 for 36 months,which of the following is closest to the annual interest rate you would need on a loan to borrow $12,000 for a new car?

You have just placed $500 in a bank account that earns an annual rate of return of 6%.How much will you have in that bank account after 6 years?

Arnold learned something very valuable as a teenager from his dad. He was told to invest $1,000 at 12% interest at age 20 and leave it alone until age 65. Arnold's dad knew that one strategy that wealthy people use is to exercise self-discipline to never touch this long-term plan. Arnold is very happy he applied his dad's advice. -If his savings account had earned a more conservative 9% annual rate of return,Arnold's savings would be approximately ________ less by age 68.

The present value interest factor is the inverse of the corresponding future value interest factor.

Who will end up with the largest amount of money invested at an annual rate of return of 9% over the next 42 years?

As a future graduation present,you uncle has just placed $6,000 in a bank account that will earn an annual rate of return of 6%.How much will be in that account when you graduate in four years?

As a teenager, Enrique learned a valuable lesson from his dad, who told him to invest $1,000 at 8 percent interest at age 20 and leave the money alone until age 65. Enrique's dad knew that one strategy used by wealthy people is to exercise self-discipline and never touch a long-term savings plan. Enrique is happy to apply his dad's advice. -If his savings account earns a more aggressive 14 percent annual rate of return,Enrique's savings will be worth approximately ________ more by age 68.

This helpful investment rule-of-thumb tells you approximately how many years it takes for a sum of money to double in size.

Your great-uncle placed $500 a year in a bank account for your "college fund" for each of the last 18 years.How much is now in your college account (at the end of the eighteenth year)if your account earned an annual rate of return of 6%?

Arnold learned something very valuable as a teenager from his dad. He was told to invest $1,000 at 12% interest at age 20 and leave it alone until age 65. Arnold's dad knew that one strategy that wealthy people use is to exercise self-discipline to never touch this long-term plan. Arnold is very happy he applied his dad's advice. -If he sticks to this plan,Arnold's savings will have grown to approximately ________ by age 62.

A series of equal dollar payments at the end of each period for "x" number of time periods is