Exam 5: The Time Value of Money

Your real estate agent mentions that homes in your price range require a payment of $1,200 per month for 30 years at 0.75% interest per month.What is the size of the mortgage with these terms?

Your car loan requires payments of $200 per month for the first year and payments of $400 per month during the second year.The APR is 12% and payments begin in one month.What is the present value of this 2-year loan?

A perpetuity is a special form of an annuity.

What is the minimum nominal rate of return that you should accept if you require a 4% real rate of return and the rate of inflation is expected to average 3.5% during the investment period?

If the five-year discount factor is d,what is the present value of $1 received in five years' time?

When money is invested at compound interest,the growth rate is the interest rate.

It is important to discount both real and nominal cash flows at the real interest rate.

What is the effective annual rate of interest on a deposit that pays interest of 10% continuously compounded?

Would a depositor prefer an APR of 8% with monthly compounding or an APR of 8.5% with semiannual compounding?

If the 5-year discount factor is 0.7008,what is the interest rate?

If the interest rate is 6%,which of these investments would you prefer?

What is the effective annual interest rate on a 9% APR automobile loan that has monthly payments?

You will be receiving cash flows of: $1,000 today,$2,000 at end of year 1,$4,000 at end of year 3,and $6,000 at end of year 5.What is the present value of these cash flows at an interest rate of 7%?

Present values can always be calculated by dividing the cash flow by a discount factor.

A car dealer offers payments of $522.59 per month for 48 months on a $25,000 car after making a $4,000 down payment.What is the loan's APR?

If the future value of an annuity due is $25,000 and $24,000 is the future value of an ordinary annuity that is otherwise similar to the annuity due,what is the implied discount rate?

An annual percentage rate (APR)is determined by annualizing the rate using compound interest.

Approximately how much must be saved for retirement in order to withdraw $100,000 per year for the next 25 years if the balance earns 8% annually,and the first payment occurs one year from now?

How much can be accumulated for retirement if $2,000 is put aside at the end of each of the next 40 years? Assume that you can earn 9% a year on your savings.

What is the present value of a four-year annuity of $100 per year that makes its first payment 2 years from today if the discount rate is 9%?