Exam 3: The Time Value of Money

Roxy is buying a house and the mortgage terms are 30 years,monthly payments.If the interest rate is 7% (APR),the loan is $300,000 loan,what is the amount of the principal in the third payment?

Your firm is evaluating a project that should generate revenue of $4,600 in year 1,$5,200 in year two,$5,900 in year three,and $5,700 in year four.The firm receives each cash flow at the end of each year.If your firm's required return is 12%,what is the future value of these cash flows at the end of year four?

If a bank lends you $10,000 and requires that you make payments of $2,500 at the end of each of the next five years,what interest rate is the bank charging?

Which statement is FALSE concerning the time value of money?

Consider the following cash flows each arriving at the end of the year.If the discount rate is 15% ,what is the (3-year)EQUIVALENT ANNUITY ?

Roxy Records,records the following cash flows at the end of each year for a project.If the firm's discount rate is 11%,what is the FUTURE VALUE of the project?

You want to buy a house in 4 years and expect to need $25,000 for a down payment.If you have $15,000 to invest,how much interest do you have to earn (compounded annually)to reach your goal?

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following end of the year cash flows.What is the FUTURE VALUE of the inflows at the end of the 4th year if the annual rate of interest is 10%?

You would like to have $1,000 one year (365 days)from now and you find that the bank is paying 7% compounded daily.How much will you have to deposit with the bank today to be able to have the $1,000?

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following end of the year cash flows.What is the EQUIVALENT ANNUITY (4-year) of the inflows of Wonder Post if the annual rate of interest is 10%?

Florida considers any loan of more than an APR compounded monthly to be usurious.What is the usurious effective annual rate?

EmmaCat Industries estimates that the scratching post project "Wonder Post" will have the following end of the year cash flows.What is the PRESENT VALUE of the inflows of Wonder Post if the annual rate of interest is 10% COMPOUNDED MONTHLY?

Prudent Policy Life Insurance Co.offers a 10-year term life insurance policy with a $250,000 benefit and annual premiums of $200,paid at the BEGINNING of each year.If Prudent can earn 8% on invested capital,what is the future value to the firm of the premiums from one policy,assuming the policy holder outlives the policy term?

Herbilux Botanicals forecasts the following cash flows at the BEGINNING of each year for a project.If the firm's discount rate is 9%,what is the FUTURE VALUE of the project?

Cozmo Costanza just took out a $24,000 bank loan to help purchase his dream car.The bank offered a 5-year loan at a 6% APR.The loan will feature monthly payments and monthly compounding of interest.Suppose that Cozmo would like to pay off the remaining balance on his car loan at the end of the second year (24 payments).What is the remaining balance on the car loan after the second year?

The Springfield Crusaders just signed their quarterback to a 10 year $50 million contract.Is this contract really worth $50 million? (assume r >0)

How much do you have to invest today at an annual rate of 8%,if you need to have $5,000 six years from today?

If you hold the annual percentage rate constant while increasing the number of compounding periods per year,then

An electric company has offered the following perpetuity to investors to raise capital for the firm.The perpetuity will pay $1 next year,and it is promised to grow at 5% per year thereafter.If you can earn 10% on invested money,how much would you pay today for this perpetuity?

A bank account has a rate of 12% APR with quarterly compounding.What is the EAR for the account?