Exam 2: How to Calculate Present Values

For $10,000,you can purchase a five-year annuity that will pay $2,358.65 per year for five years.The payments occur at the beginning of each year.Calculate the effective annual interest rate implied by this arrangement.

What is the eight-year present value annuity factor at a discount rate of 11%?

If the present value of $480 to be paid at the end of one year is $400,what is the one-year discount factor?

If the present value annuity factor for 10 years at 10% interest rate is 6.1446,what is the present value annuity factor for an equivalent annuity due?

The present value of a growing perpetuity,with cash flow C1 occurring one year from now,is given by: [C₁/(r - g)],where r > g.

Briefly explain continuous compounding.

A perpetuity is defined as a sequence of:

If the present value annuity factor at 8% for 10 years is 6.71,what is the equivalent future value annuity factor?

What is the difference between simple interest and compound interest?

Mr.Hopper expects to retire in 30 years,and he wishes to accumulate $1,000,000 in his retirement fund by that time.If the interest rate is 12% per year,how much should Mr.Hopper put into his retirement fund at the end of each year in order to achieve this goal?

Intuitively explain the concept of present value.

Which of the following statements regarding the net present value rule and the rate of return rule is false?

If the future value of $1 invested today at an interest rate of r% for n years is 9.6463,what is the present value of $1 to be received in n years at r% interest rate?

The present value of $121,000 expected one year from today at an interest rate (discount rate)of 10% per year is:

What is the net present value (NPV)of the following sequence of cash flows at a discount rate of 9%?

Generally,one should accept investments that offer rates of return in excess of their opportunity costs of capital.

If the present value of $600,expected one year from today,is $400,what is the one-year discount rate?

What is the net present value of the following sequence of annual cash flows at a discount rate of 16% APR?

After retirement,you expect to live for 25 years.You would like to have $75,000 income each year.How much should you have saved in your retirement account to receive this income,if the interest rate is 9% per year? (Assume that the payments start on the day of your retirement.)

An annuity is defined as a set of: