Exam 2: The Time Value of Money: All Dollars Are Not Created Equal

Looking at a future value of $1 table,you find the number 4.661 for 20 years and 8%.This means that a dollar invested today will grow to $4.661 at the end of 20 years.

At an 8% rate,you must invest $5,000 to have $10,000 in about 6 years.

Inflation decreases the purchasing power of money.

The present value of $500 received at the end of each of the next three years is $1,243 (assuming a 10% interest rate).

In relation to an ordinary annuity paid in any given year,an annuity due is

Ideally,the ending balance in our savings plan is zero.

Given recent market experience a dollar today is worth

Young people most likely prefer a savings schedule with

Discounting is the process of reducing future values to present values.

You can double your investment in 6 years if you can earn 12% on your investments.

Most young people prefer a savings schedule with decreasing annual deposits to the savings account.

An annuity contract will pay you $4,000 a year (end of year)for the next three years.Or,you can choose to receive $12,610 at the end of the third.Assuming that you can earn 8% on investments,you should

Discounting is the process of reducing future values to present values.

The first step in goal planning is setting up a budget.

You will buy a lottery ticket.If you win,you have a choice of receiving $995,000 now or three equal end-of-year payments of $400,000.You should take the payments

Which item below is not associated with goal planning?

Years with negative balances in the savings schedule implies that loans would be needed to achieve the goals.

Compounding is the process of increasing present value to future value.

Assuming a discount rate of 10%,the present value of $1,000 received one year from now is

You will need $228,790 in 28 years to supplement your retirement funds.If you can earn 8% interest,you must save $________ each year.(Table or calculator required. )