Exam 3: Time Value of Money - Introduction

In its first year of operations,1980,the Gourmet Cheese Shoppe had earning per share of $0.26.Four years later,in 1984,EPS was up to $0.38,and 7 years after that,in 1991,EPS was up to $0.535.It appears that the first four years represented a supernormal growth situation and since then a more normal growth rate has been sustained.What are the rates of growth for the earlier period and for the later period? (Round to the nearest whole number)

You deposited ($1,000)in a savings account that pays 8 percent interest,compounded quarterly,planning to use it to finish your last year in college.Eighteen months later,you decide to go to the Roshy Mountains to become a ski instructor rather than continue in school,so you close out your account.How much money will you receive? (Round to the nearest whole dollar)

Approximately how much must Tiffany invest today to accumulate $10,000 in ten years if she can earn 10% compounded annually? (Round to the nearest whole dollar)

Your current investment will mature in 2 years for $30,000,at which time you will reinvest the funds for 10 more years at 7% per year.What will be the value of your investment at the end of the 12th year?

$1,200 is deposited today into an account paying 6% interest compounded semiannually.How much interest will have been earned after 25 years?

When you turned 20,you deposited $1,500 into an account paying interest that is compounded quarterly.You just turned 30,and there is now $2,233.30 in the account.What nominal annual interest rate is the account paying?

If you presently have $6,000 invested at a rate of 15%,how many years will it take for you investment to triple? (Round up to obtain a whole number of years if necessary.)

Suppose you put $100 into a savings account today,the account pays a nominal annual interest rate of 6 percent,but compounded semiannually,and you withdraw $100 after 6 months.What would your ending balance be 20 years after the initial $100 deposit was made?

Kayla hopes to purchase a new car in five years.If she deposits $10,000 today in an account that pays 7% compounded quarterly,how much will she be able to spend on the new car in five years?

Your aunt dies and leaves you $1M in her will,but it must stay in trust for 10 years.You want to spend it now,so you go to the Bank to borrow against the bequest.You offer the $1M to repay interest and principal at the end of ten years.The Bank wants to earn 5% on its loan,so how much will it offer you today?

Julian was given a gold coin originally purchased for $1 by his great grandfather 50 years ago.Today the coin is worth $450.The rate of return realized on the sale of this coin is approximately equal to:

The future value of $100 received today and deposited at 6 percent for four years is: (Round to the nearest whole dollar)

A bank pays a quoted annual (nominal)interest rate of 8%.However,it pays interest (compounded)daily using a 365-day year.What is the effective annual rate of return?

You put $100 in a bank for a fixed two year term.The interest rate on the loan is 8% per annum,compounded semi-annually.Because the term is fixed,you are not allowed to withdraw interest at any point.What is the total amount of interest earned in the final half-year of the term?

Shylock Bank offers a savings account with a nominal rate of 7% and daily compounding.What is the effective rate of the account? (Assume a 365 day year.)

How much does Ralph need to invest today to have $150,000 in five years if he will earn 8% interest compounded quarterly on his investment? (Round to the nearest whole dollar)

How much will you need in 30 years to have the same purchasing power that $150 has today,if inflation averages 4% per year?

Gary has $1,400 to invest with the goal of having $4,000 available to purchase a used car.If he can earn 12% compounded semiannually on his investment,how long will he have to wait to acquire his car?

The present value of $100 to be received 10 years from today,assuming an opportunity cost of 9 percent,is: (Round to the nearest whole dollar)

The rate of interest agreed upon contractually charged by a lender or promised by a borrower is the ________ interest rate.