Exam 3: The Time Value of Money

A stainless steel products manufacturer with an 8.5% cost of capital receives a $3,000,000 order,payable at the end of three years.What is the annual payment amount made at the end of each year with the equivalent present value?

If you deposit $9,000 at the end of each year in an account earning 8% interest,what will be the value of the account in 25 years?

Which of the following statements is TRUE?

You have the choice between two investments that have the same maturity and the same nominal return.Investment A pays SIMPLE interest,investment B pays compounded interest.Which one should you pick?

You set up a college fund in which you pay $2,000 each year at the BEGINNING of the year.How much money will you have accumulated in the fund after 18 years,if your fund earns 7% compounded annually?

If you invest $2,500 in a bank account that pays 6% interest compounded monthly,how much will you have in five years?

A $200 investment in an account that pays 7% continuous interest would be worth how much in twenty years?

As a young graduate,you have plans on buying your dream car in three years.You believe the car will cost $50,000.You have two sources of money to reach your goal of $50,000.First,you will save money for the next three years in a money market fund that will return 8% annually.You plan on making $5,000 annual payments to this fund.You will make yearly investments at the BEGINNING of the year.The second source of money will be a car loan that you will take out on the day you buy the car.You anticipate the car dealer to offer you a 6% APR loan with monthly compounding for a term of 60 months.To buy your dream car,what monthly car payment will you anticipate?

A financial advisor recommends saving $1,000,000 for a comfortable retirement.With investment returns of 8%,what is the annual year-end cash flow generated by the $1 million for 25 years,assuming you spend all of the principal and interest?

You are comparing four different investments,as described below: Investment A: Pays 12%,compounded annually Investment B: Pays 12%,compounded quarterly Investment C: Pays 12%,compounded semi-annually Investment D: Pays 12%,compounded continuously Which of the above investments would result in the highest future value?

Last national bank offers a CD paying 7% interest (compounded annually).If you invest $1,000 how much will you have at the end of year 5.

If you invested $2,000 in an account that pays 12% interest,compounded continuously,how much would be in the account in 5 years?

When you retire you expect to live for another 30 years.During those 30 years you want to be able to withdraw $45,000 at the BEGINNING of each year for living expenses.How much money do you have to have in your retirement account to make this happen.Assume that you can earn 8% on your investments.

If you need $35,000 for a down payment on a house in six years,how much money must you invest today at 7% interest compounded annually to achieve your goal?

You want to buy your dream car,but you are $5,000 short.If you could invest your entire savings of $2,350 at an annual interest of 12%,how long would you have to wait until you have accumulated enough money to buy the car?

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 interest in the fifth payment?

Emma is buying a house and the mortgage terms are 30 years,monthly payments.If the interest rate is 6% (APR),the loan is $200,000 loan,but Emma will make $300 a month in addition to the required payment,what will the life of the loan be?

For a positive r,

Which of the following investments would have the highest future value (in year 5)if the discount rate is 12%?

If the rate of interest that investors can earn on a 2-year investment is zero then