Exam 5: Time Value of Money

Calculate the present value of $800 received at the beginning of year 1,$400 received at the beginning of year 2,and $700 received at the beginning of year 3,assuming an opportunity cost of 9 percent.

Aunt Tilly borrows $3,500 from the bank at 12 percent annually compounded interest to be repaid in four equal annual installments.The interest paid in the first year is ________.

How many years would it take for Jughead to save an adequate amount for retirement if he deposits $2,000 per month into an account beginning today that pays 12 percent per year if he wishes to have a total of $1,000,000 at retirement?

An annuity with an infinite life is called a(n)________.

Calculate the future value of $6,490 received today and deposited for five years in an account which pays interest of 14 percent compounded semiannually.

To expand its operation,International Tools Inc.has applied to the International Bank for a 3-year,$3,500,000 loan.Prepare a loan amortization table assuming 10 percent rate of interest.

Tom is evaluating the growth rate in dividends of a company over the past 6 years.What is the annual compound growth rate if the dividends are as follows:

________ is the amount earned on a deposit that has become the part of the principal at the end of a specified time period.

The future value of $200 received today and deposited for three years in an account which pays semiannual interest of 8 percent is ________.

When computing the number of deposits needed to accumulate to a future sum,it will take longer if the interest rate decreases,holding the future value and deposit size constant.

Nico is 30 years old and will retire at age 65.He will receive retirement benefits,but the benefits are not going to be enough to make a comfortable retirement life for him.Nico has estimated that an additional $25,000 a year over his retirement benefits will allow him to have a satisfactory life.How much should Nico deposit today in an account paying 6 percent interest to meet his goal? Assume Nico will have 15 years of retirement.

Everything else being equal,the higher the discount rate,the higher the present value.