Exam 3: Applying Time Value Concepts

Use the data in table 3.1 to answer the following question(s): Table 3.1 -Refer to Table 3.1 above.How much will you have if you deposit $1,000 today in an account paying 7% and you leave it on deposit for 5 years?

Using the Time Value of Money charts provided,answer the following question.(Note to Instructors: Provide the appropriate tables to students from Personal Finance,Sixth Edition,Appendix C: Financial Tables.) Judy would like to have $200,000 saved in her retirement account in 20 years.Assuming an interest rate of 10%,how much should she contribute each year?

If Sandy has $7,000 today and invests it for five years at a 5% interest rate,how much will she have in five years?

If the payment in an ordinary annuity changes over time,you cannot determine the future value of the payment stream.

Present and future values concepts are not applied to which of the following?

Lucky Louie just won the lottery!! He has a choice of taking $1,000,000 in cash or receiving $50,000 per year for 30 years beginning at the end of this year.The best way to make this choice is to

The process of earning ________ on interest is referred to as compounding.

When money accumulates interest,it is said to be discounting.

In the tables for the future value of a single sum,the future value factors are all less than one.

You wish to retire in 30 years and determine that you will need $1,000,000 to fund your retirement.If you can invest with a return of 8% you will need to invest ________ each year to reach your goal.

Use the following two columns of items to answer the matching questions below: -future value interest factor

If I deposit a sum of money today and want it to double in 10 years,I will need to receive an interest rate of slightly above ________.

Which of the following decisions would involve the use of the future value of a $1 ordinary annuity table?

Use the data in table 3.1 to answer the following question(s): Table 3.1 -Refer to Table 3.1 above.How much will you have if you deposit $1,000 each year for the next 5 years in an account paying 7%?

The present value of an annuity can be obtained by discounting the individual cash flows of the annuity and then summing the resulting present values.

Mr.Berkey deposits $10,000 in a money market account at his local bank.He receives annual interest of 8% for 7 years.How much interest will he earn on his investment during this time period?

At what annual rate would $500 grow to $1,948 in 12 years? (Note-Solve as a present value problem.)

You have set a $100,000 goal for a college funds for your newborn child.You plan on having a fixed amount taken from your salary each month to meet this goal.The calculation to determine the monthly amount is called

Your utility bill,which varies each month,is an example of an annuity.

Which of the following decisions would involve the use of the present value of $1?