Exam 3: The Time Value of Money

A few years after graduating from college,you decide to get an MBA.This endeavor sets you back $100,000 in loans.Luckily,you have the option to consolidate these loans at 5%.You opt for a 30-year payback period with monthly installments due at the end of each month.What is the monthly payment on the consolidated loan?

Your firm rents office space for $250,000 per year,due at the BEGINNING of each year.If your firm's hurdle rate is 10%,what is the present value of five years' worth of rent?

What is the present value of $25 to be received at the BEGINNING of each year for the next 6 years if the discount rate is 12%?

A report from the marketing department indicates that a new product will generate the following revenue stream: $62,500 in the first year,$89,400 in year two,$136,200 in year three,$128,300 in year four,and $112,000 in year five.If your firm's discount rate is 11% and the cash flows are received at the end of each year,what is the present value of this cash flow stream?

You want to buy a new plasma television in 3 years,when you think prices will have gone down to a more reasonable level.You anticipate that the television will cost you $2,500.If you can invest your money at 8% compounded monthly,how much do you need to put aside today?

Your credit card carries a 9.9% annual percentage rate,compounded daily.What is the effective annual rate,or annual percentage yield?

Which of the following statements is TRUE?

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

You will receive a stream of $50 payments BEGINNING at the end of year 1 until the final payment at the end of year 5.What amount will you have at the end of year 5 if you can invest all amounts at a 9% interest rate?

Suppose you take out a loan from the local mob boss for $10,000.Being a generous banker,the mob boss offers you an APR of 60% with monthly compounding.The length of the loan is 3 years with monthly payments.However,you want to get out of this arrangement as quickly as possible.You decide to pay off whatever balance remains after the first year of payments.What is your remaining balance after one year?

Suppose that Hoosier Farms offers an investment that will pay $10 per year forever.How much is this offer worth if you need a 8% return on your investment?

Emma Botanicals forecasts the following cash flows at the end of each year for a project.If the firm's discount rate is 9%,COMPOUNDED SEMI-ANNUALLY ,what is the present value of the project?

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 PRESENT VALUE of the project?

An investor puts $200 in a money market account TODAY that returns 3% per year with monthly compounding.The investor plans to keep his money in the account for 2 years.What is the future value of his investment when he closes the account two years from today?

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

You decide that your family would be comfortable living on an annual income of $150,000,growing at 4% per year.You'd also like to continue generating this cash flow for your descendents,forever.With investment returns of 8%,how much wealth would you need today to provide this income starting with $150,000 one year from now?

You are evaluating a perpetuity.The first payment is $100,and it arrives in one year.Each subsequent annual payment will increase by 10%.If the discount rate is 8%,what is the present value of this perpetuity?

Mendelson Implements 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 at the end of the last year?

What is the effective annual rate of 12% compounded monthly?

Mendez Implements records the following cash flows at the BEGINNING of each year for a project.If the firm's discount rate is 11%,what is the value of the project at the end of the last year?