Exam 9: Time Value of Money

You have just won a lottery! You will receive $50,000 a year beginning one year from now for 20 years.If your required rate of return is 10%,what is the present value of your winning lottery ticket?

Barach Obama borrows $4,500 at 12 percent annually compounded interest to be repaid in four equal annual installments.The actual end-of-year payment is

The rate of interest actually paid or earned,also called the annual percentage rate (APR),is the ________ interest rate.

Suppose you receive $3,000 a year in years one through four,$4,000 a year in years five through nine,and $2,000 in year 10,with all the money to be received at the end of the year.If your discount rate is 12%,what is the present value of these cash flows?

For positive interest rates,the present value interest factor is

Cecilia bought 100 shares of Minnesota Mining and Manufacturing in June,1987 for $38 a share for a total investment of $3,800.She sold the shares in June,1996 for $8,960.What is Cecilia's annual rate of return on her investment?

Daniel deposits $2,000 per year at the end of the year for the next 15 years into an IRA account that currently pays 7%.How much will Daniel have on deposit at the end of the 15 years?

The present value of an annuity of $5,000 to be received at the end of each of the 6 years at a discount rate of 4% would be:

A loan that is repaid in equal payments over a specified time period is referred to as a (n):

The present value of a $100 annuity deposited for 10 years at 10% is $1,593.74.

Interest earned only on an investment's principal or original amount is referred to as:

Suppose you were going to save $1,000 per year for three years at a 10% interest rate compounded annually,with the first investment occurring today.What would be the future value of this investment?

Which of the following statements is most correct?

An annuity with an infinite life is called a (n)

A loan amortization schedule shows the breakdown of each payment between interest and principal,as well as the remaining balance after each payment.

Consolidated Freightways is financing a new truck with a loan of $60,000 to be repaid in six annual end-of-year installments of $13,375.What annual interest rate is Consolidated Freightways paying?

In 1966,the average tuition for one year in the MBA program at the University of Chicago was $3,600.Thirty years later,in 1996,the average tuition was $27,400.What is the compound annual growth rate in tuition (rounded to the nearest whole percentage)over the 30-year period?

You need $8,000 four years from now for a down payment on your future house.How much money must you deposit today if your credit union pays 5% interest compounded annually? Pick the closest answer.

The future value of $200 received today and deposited at 8 percent for three years is

The future value of a $100 deposit in 10 years at 10% is $259.37.