Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

You deposit $200 in an account that doubles in 10 years.How many years will it take the account to be reduced to its original value if it loses 25 percent per year?

At age 25 you invest $2,000 that earns 6 percent each year.At age 35 you invest $2,000 that earns 9 percent per year.In which case would you have more money at age 60?

Scenario A: At age 27,you invest $1,500 that earns 9 percent each year.Scenario B: At age 40,you invest $2,500 that earns 11 percent per year.Under which scenario do you accumulate more money by age 60?

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year?

We call the process of earning interest on both the original deposit and on the earlier interest payments

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?

An appliance store sells a TV for $1,200 and gives their customers a full three years to pay for the TV.If interest rates are 5 percent,what is the equivalent sales price of the TV when the customer takes the full 3 years to pay for it?

Which of the following will not increase a present value?

How long will it take $100 to reach $500 when it grows at 10 percent per year?

A $1,000 investment has doubled to $2,000 in seven years.How much longer will it take for the investment to reach $5,000 if it continues to earn the same rate?

Assume you borrow $100 from a payday lender.The terms are that you must pay a fee of $25 in advance (today)and one year from now you need to repay $112.What implied interest rate are you paying?

Assume that you borrow $2,000 from your sister and that you will pay her back in one lump sum.She charges you 9 percent interest in year 1 and increases the rate by 1 percent per year until the loan is paid off.How much will you owe if you wait until year 3 to pay off the loan?

When computing the rate of return from selling an investment,the number of years between the present and future cash flows is an important factor in determining

Which of the following is the equivalent of $300 received today?

Approximately what interest rate is needed to double an investment over four years?

You just won the lottery and after taxes you have $32,000.You want to have $1,000,000 by the time you are 65,which is 45 years from now.Assuming that you can earn 9 percent each year on your money,how much (in dollars)of the $32,000 must you invest today?

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4 percent?

What is the present value of a $250 payment in one year when the discount rate is 6 percent?

The longer money can earn interest,

How long will it take $3,000 to reach $5,000 when it grows at 7 percent per year?