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

You are considering an investment that is expected to pay 5 percent in year 1, 7 percent in years 2 and 3 and 9 percent in year 4. If you invest $2,000 today, what will this investment be worth at the end of the fourth year?

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

Ten years ago, Jane invested $1,000 and locked in a 7 percent annual interest rate for 30 years (end 20 years from now). James can made a 20-year investment today and lock in a 6 percent interest rate. How much money should he invest now in order to have the same amount of money in 20 years as Jane?

What is the present value of a $600 payment in one year when the discount rate is 8 percent?

Approximately how many years does it take to double a $300 investment when interest rates are 8 percent per year?

Time value of money concepts can be used by:

Which of the following investments would you prefer?

Compute the present value of $3,000 paid in four years using the following discount rates: 3 percent in year 1, 4 percent in year 2, 5 percent in year 3, and 6 percent in year 4.

A $7 million deposit earns 5 percent for 9 years. If the account loses 2 percent per year after that, how long will it take to be reduced back to $7 million?

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

You have $100,000 in your account. Assuming no additional deposits are made and your account earns 15 percent per year, how long will it take for the account to have a balance of $500,000?

You are considering an investment that is expected to pay 3 percent in year 1, 5 percent in years 2 and 3 and 7 percent in year 4. If you invest $1,000 today, what will this investment be worth at the end of the fourth year?

We call the process of earning interest on both the original deposit and on the earlier interest payments:

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?

A firm's net income last year was $2.65 million. Its net income grew 8 percent during the last 5 years. If that growth rate continues, how long will it take for the firm's net income to double?

Which of the following statements is correct?

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

Consider a $200 deposit earning 8 percent interest per year for three years. How much total interest is earned on interest (excluding interest earned on the original deposit)?

If an average home in your town currently costs $250,000, and house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in 8 years?

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?