Exam 14: Time Value of Money

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An investor expects to receive 10 payments of $5,000 each made at the end of each period. If interest is compounded at 5% annually, what is the future value of these payments?

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Tom liquidates an investment, and his proceeds will be received in 8 annual payments of $10,000 each with interest computed at 7%. What is the Present Value of this Annuity?

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The present value of an annuity is the discounted future value of cash flows made at regular intervals.

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Chris Hines invested $12,000 in a municipal bond. The bond pays 8% interest and matures in 3 years. How much money will Chris have at maturity?

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Jay has made a deal with his daughter to start a car fund for when she graduates college in 6 years. He has found an investment that will yield an interest rate of 8% per year. If he wants to have $25,000 to spend on the car for his daughter, how much must he initially invest?

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Compound interest is computed on which of the following?

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When determining the future value of an annuity, cash flows are presumed to occur

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