Exam 9: Time Value of Money

You need to have $35,000 on hand to buy a new Lexus five years from today.To achieve that goal,you want to know how much you must invest today in a certificate of deposit guaranteed to return you 9% per year.To help determine what today investment is sum must be,you will use:

Dan Quayle plans to fund his individual retirement account (IRA)with the maximum contribution of $2,000 at the end of each year for the next 10 years.If Dan can earn 10 percent on his contributions,how much will he have at the end of the tenth year?

The annual rate of return is often referred to as the

$100 is received at the beginning of year 1,$200 is received at the beginning of year 2,and $300 is received at the beginning of year 3.If these cash flows are deposited at 12 percent,their combined future value at the end of year 3 is ________.

Which of the following terms best describes an annuity due?

When solving for the future value of an amount deposited now,which one of the following factors would not be an input?

An ordinary annuity exists when the equal payments occur at the beginning of each time period.

Jill Clinton puts $1,000 in a savings passbook that pays 4% compounded quarterly.How much will she have in her account after five years?

Your college has agreed to give you a $10,000 tuition loan.As part of the agreement,you must repay $12,600 at the end of the three-year period.What interest rate is the college charging?

A loan that is repaid in equal payments over a specified time period is called a (n)

The effective annual rate is determined by multiplying the interest rate charged per period by the number of periods in a year.

Carly Fiorina owns stock in a company which has consistently paid a growing dividend over the last five years.The first year Carly owned the stock,she received $1.71 per share and in the fifth year,she received $2.89 per share.What is the growth rate of the dividends over the last five years?

The annual rate of return is often referred to as the

John deposits $2,000 per year at the end of the year for the next 20 years into an IRA account that pays 6%.How much will John have on deposit at the end of 20 years?

A wealthy inventor has decided to endow her favorite art museum by establishing funds for an endowment which would provide $1,000,000 per year for research.The scientist will fund the endowment upon her fiftieth birthday 10 years from today.She plans to accumulate the endowment by making annual end-of-year deposits into an account.The rate of interest is expected to be 6 percent in all future periods.How much must the scientist deposit each year to accumulate to the required amount?

The future value of an ordinary annuity of $5,000 invested at 8% in 5 years would result in a value of:

At a zero interest rate,the present value of $1 remains at $1 and is not affected by time.

The return provided by a $100 annuity deposited for 10 years that results in a future value of $614.46 is -11.45%.

At very high interest rates the "Rule of 72" will result in a small estimation error for the estimate of the time for an investment to double.

Which of the following characteristics is not descriptive of an amortization schedule?