Exam 4: Introduction to Valuation: The Time Value of Money

Sixty years ago,your grandparents opened two savings accounts and deposited $200 in each account.The first account was with City Bank at 3 percent,compounded annually.The second account was with Country Bank at 3.5 percent,compounded annually.Which one of the following statements is true concerning these accounts?

At 10 percent interest,how long does it take to quadruple your money?

Isaac only has $690 today but needs $800 to buy a new laptop.How long will he have to wait to buy the laptop if he earns 5.4 percent compounded annually on his savings?

Terry invested $2,000 today in an investment that pays 6.5 percent annual interest.Which one of the following statements is correct,assuming all interest is reinvested?

You have just made your first $5,000 contribution to your individual retirement account.Assuming you earn a 5 percent rate of return and make no additional contributions,what will your account be worth when you retire in 35 years? What if you wait for 5 years before contributing?

Sam wants to invest $5,000 for 5 years.Which one of the following rates will provide him with the largest future value?

Travis invests $10,000 today into a retirement account.He expects to earn 8 percent,compounded annually,on his money for the next 26 years.After that,he wants to be more conservative,so only expects to earn 5 percent,compounded annually.How much money will he have in his account when he retires 38 years from now,assuming this is the only deposit he makes into the account?

You're trying to save to buy a new $210,000 Ferrari.You have $38,000 today that can be invested at your bank.The bank pays 4.1 percent annual interest on its accounts.How long will it be before you have enough to buy the car?

You and your sister are planning a large anniversary party 3 years from today for your parents' 50^th wedding anniversary.You have estimated that you will need $4,500 for this party.You can earn 2.5 percent compounded annually on your savings.How much would you and your sister have to deposit today in one lump sum to pay for the entire party?

Today,Courtney wants to invest less than $5,000 with the goal of receiving $5,000 back some time in the future.Which one of the following statements is correct?

Todd will be receiving a $10,000 bonus one year from now.The process of determining how much that bonus is worth today is called:

You have $1,100 today and want to triple your money in 5 years.What interest rate must you earn if the interest is compounded annually?

Today,Stacy is investing $26,000 at 6.0 percent,compounded annually,for 4 years.How much additional income could he earn if he had invested this amount at 7 percent,compounded annually?

Your parents spent $6,200 to buy 500 shares of stock in a new company 13 years ago.The stock has appreciated 9 percent per year on average.What is the current value of those 500 shares?

Which one of the following is the correct formula for the future value of $500 invested today at 7 percent interest for 8 years?

Jeff deposits $3,000 into an account which pays 2.5 percent interest,compounded annually.At the same time,Kurt deposits $3,000 into an account paying 5 percent interest,compounded annually.At the end of three years:

How long will it take to double your savings if you earn 7.2 percent interest,compounded annually?

Jenny needs to borrow $16,000 for 3 years.The loan will be repaid in one lump sum at the end of the loan term.Which one of the following interest rates is best for Jenny?

Your coin collection contains ten 1939 silver dollars.If your great grandparents purchased them for their face value when they were new,how much will your collection be worth when you retire in 2050,assuming they appreciate at a 5.1 percent annual rate?

Given an interest rate of zero percent,the future value of a lump sum invested today will always: