Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

A deposit of $700 earns interest rates of 10 percent in the first year and 7 percent in the second year. What would be the second year future value?

A deposit of $500 earns 5 percent the first year, 6 percent the second year, and 7 percent the third year. What would be the third year future value?

What is the future value of $700 deposited for one year earning 4 percent interest rate annually?

Five years ago, sales were $4 million. Today your company's sales are $10 million. What annual rate have sales been growing?

What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually?

An appliance store sells a TV for $1,200 and gives their customers a full three years to pay for the TV. If interest rates are 5 percent, what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?

Which of the following would you prefer?

A $5,000 investment has doubled to $10,000 in ten years. How much longer will it take for the investment to reach $15,000 if it continues to earn the same rate?

Which is more valuable, receiving $775 today or receiving $885 in 2.5 years if interest rates are 7.25 percent?

Ten years ago, Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now). Aidan can make a 20-year investment today and lock in an 8 percent rate. How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year?

What is the value in year 6 of a $9,000 cash flow made in year 14 if interest rates are 7 percent in years "4 through 9" and increase to 10 percent after that?

As the production manager of HPG, Inc., you have received an offer from the supplier who provides the wires used in headsets. Due to poor planning, the supplier has an excess amount of wire and is willing to sell $750,000 worth for only $600,000. You already have one year's supply of wire on hand. This new wire would be used one year from today. What implied interest rate would your firm be earning if you purchased the wire?

Which is more valuable, receiving $1,000 today or receiving $1,200 in 3 years if interest rates are 7 percent?

A stock investor deposited $3,450 six years ago. Today the account is valued at $2,180. What annual rate of return has this investor earned?

How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

People borrow money because they expect

What is the future value of $2,000 deposited for one year earning 6 percent interest rate annually?

You want to retire in 25 years and you have just inherited $300,000. You believe you will need $1,450,000 upon retirement. What rate will you need to earn on the account to achieve this goal?