Exam 9: Time Value of Money

If you presently have $6,000 invested at a rate of 15 percent,how many years will it take for your investment to triple? (Round up to obtain a whole number of years if necessary. )

Which of the following statements is correct?

Given some amount to be received several years in the future,if the interest rate increases,the present value of the future amount will

You plan to invest $2,500 in a money market account which will pay an annual stated (simple)interest rate of 8.75 percent,but which compounds interest on a weekly basis.If you leave this money on deposit for one year (52 weeks),what will be your ending balance when you close the account?

At an inflation rate of 9 percent,the purchasing power of $1 would be cut in half in 8.04 years.How long to the nearest year would it take the purchasing power of $1 to be cut in half if the inflation rate were only 4%?

Solving for the interest rate associated with a stream of uneven cash flows,without the use of a calculator,usually involves a trial and error process.

The post-audit is a simple process in which actual results are compared to forecasted results and any discrepancy indicates a change factors that are completely under management's control.

Your father,who is 60,plans to retire in 2 years,and he expects to live independently for 3 years.Suppose your father wants to have a real income of $40,000 in today's dollars in each year after he retires.His retirement income will start the day he retires,2 years from today,and he will receive a total of 3 retirement payments.Inflation is expected to be constant at 5 percent.Your father has $100,000 in savings now,and he can earn 8 percent on savings now and in the future.How much must he save each year,starting today,to meet his retirement goals?

Although the payback method ignores the time value of money,relying solely on this capital budgeting method will always lead to value maximizing decision.

South Penn Trucking is financing a new truck with a loan of $10,000 to be repaid in 5 annual end-of-year installments of $2,504.56.What annual interest rate is the company paying?

Bank One currently charges a 10 percent simple rate on a car loan where the interest is compounded semiannually.Bank Two offers a car loan where the interest is compounded quarterly.What simple rate would Bank Two have to charge in order to earn the same effective annual rate that is earned by Bank One?

Which of the following statements is false?