Exam 9: Time Value of Money

You want to buy a Volvo in seven years.The car is currently selling for $50,000, and the price will increase at a compound rate of 10% per year.You can presently invest in high-yield bonds earning a compound annual rate 14% per year.How much must you invest at the end of each of the next seven years to be able to purchase your dream car in seven years?

In future value or present value problems, unless stated otherwise, cash flows are assumed to be

The future value of a dollar ________ as the interest rate increases and ________ the farther in the future an initial deposit isis the funds are to be received.

If the quarterly rate of interest is 2.5% and interest is compounded quarterly, then the APR is:

If the quarterly rate of interest is 2.5% and interest is compounded quarterly, then the EAR is:

The future value of $200 received today and deposited for three years in an account which pays semiannual interest of 8 percent is ________.

Moe Howard borrows $10,500 from the bank at 11 percent annually compounded interest to be repaid in six equal annual installments.The interest paid in the first year is

An amortized loan is repaid in equal payments over a specified time period.

The return provided by $100 deposited for 10 years that results in a future value of $614.46 is 19.91%.

John deposits $2,000 per year at the end of the year for the next 20 years into an IRA account that pays 6%.How much will John have on deposit at the end of 20 years?

If a Canadian Savings bond can be purchased for $29.50 and has a maturity value at the end of 25 years of $100, what is the annual rate of return on the bond?

Your subscription to Consumer Reports is about to expire.You may renew it for $24 a year or, instead, you may get a lifetime subscription to the magazine for a onetime payment of $400 today.Payments for the regular subscription are made at the beginning of each year.Using a discount rate of 5%, how many years does it take to make the lifetime subscription the better deal?

$1000 deposited in a bank that earns 7% per year will become approximately $7,600 in 30 years.

Money has a time value so long as interest is earned by saving or investing money.

Interest earned only on an investment's principal or original amount is referred to as:

Joe Biden plans to fund his individual retirement account (IRA) with the maximum contribution of $2,500 at the end of each year for the next 30 years.If Joe can earn 10 percent on his contributions, how much will he have at the end of the tenth year?

You borrow $10,000 to pay for your college tuition.The loan is amortized over a three-year period with an interest rate of 18%.What is your remaining balance at the end of year two?

Suppose you have a choice of two equally risky annuities, each paying $1,000 per year for 20 years.One is an annuity due, while the other is an ordinary annuity.Which annuity would you choose?

The _________ value of a savings or investment is its amount or value at the present current time.

The return provided by $100 deposited for 10 years that results in a future value of $614.46 is -11.45%.