Exam 14: Time Value of Money

An _____________ is a series of equal payments occurring at equal intervals.

From the perspective of a depositor, a savings account is a liability with interest.

To calculate present value of an amount, two factors are required: __________________ and ___________________.

The future value of an ordinary annuity is the accumulated value of each annuity payment with interest one period after the date of the final payment.

A company is creating a fund by depositing $65,763 today.The fund will grow to $90,000 after eight years.What annual interest rate is the company earning on the fund?

Explain the concept of the future value of a single amount.

Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest compounded quarterly.How much will Keisha have accumulated after two years?

The number of periods in a future value calculation can only be expressed in years.

Madera Iron Sculpting is planning to save the money needed to replace one of its robotic welders in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1.The deposits will earn 10% interest.How much money will Sierra have accumulated at the end of five years to replace the welder?

A company can use present and future value computations to estimate the interest component of holding assets over time.

_____________ is a borrower's payment to the owner of an asset for its use.

The present value factor for determining the present value of a single sum to be received three years from today at 10% interest compounded semiannually is 0.7462.

Chad is setting up a retirement fund, and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest.How long will it take him to reach his retirement goal of $69,080?

You hope to retire in 10 years.Regrettably you are only just now beginning to save money for this purpose.You expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you retire?

The interest rate is also called the __________________ rate.

Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on the loan is 5%, compounded annually.How much did Annette borrow today?

A company borrows money from the bank by promising to make six annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?

When you reach retirement age, you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?

At an annual interest rate of 8% compounded annually, $5,300 will accumulate to a total of $7,210.65 in five years.

A company borrows money from the bank by promising to make eight semiannual payments of $9,000 each.How much is the company able to borrow if the interest rate is 10% compounded semiannually?