Exam 14: Time Value of Money

The present value of an annuity table can be used to determine the value today of a series of payments to be received in the future.

Define interest.

The present value of eight $5,000 semiannual payments invested for 4 years at 8% compounded semiannually is $33,663.50.(PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462.(PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

What amount can you borrow if you make seven semiannual payments of $4,000 at an 8% annual rate of interest? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

Protocol Company has acquired equipment from a dealer that requires equal payments of $12,000 at the end of each of the next five years.This transaction includes interest at 9%,compounded annually.What is the value of the machine today?

To calculate present value of an amount,two factors are required: The ________ and the________.

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for 7 years.What is the amount of the annual deposits that the company must make?

Trey has $105,000 now.He has a loan of $175,000 that he must pay at the end of 5 years.He can invest his $105,000 at 10% interest compounded semiannually.Will Trey have enough to pay his loan at the end of the 5 years?

What annual interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

Which column (i)and row (n)would you use from a present value or future value table for 8% interest compounded quarterly for 6 years?

Paul wants to invest a sum of money today that will accumulate to $50,000 at the end of 4 years.Assuming he can earn an interest rate of 8% compounded semiannually,how much must he invest today? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

Mason Company has acquired a machine from a dealer that requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?

The present value of 1 formula is often useful when a borrowed asset must be repaid in full at a later date and the borrower wants to know the worth of the asset at the future date.

The future value of $100 compounded semiannually for 3 years at 12% equals $140.49.(PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

A company is considering an investment that will return $22,000 semiannually at the end of each semiannual period for 4 years.If the company requires an annual return of 10%,what is the maximum amount it is willing to pay for this investment? (PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)

Giuliani Co.lends $524,210 to Craig Corporation.The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each.What semiannual interest rate is Craig paying on the loan?

Interest is the borrower's payment to the owner of an asset,for its use.

Future value can be found if the interest rate (i),the number of periods (n),and the present value (p)are known.

The present value of $2,000 to be received nine years from today at 8% interest compounded annually is $1,000.40.(PV of $1,FV of $1,PVA of $1,and FVA of $1)(Use appropriate factor(s)from the tables provided.)