Exam 4: Introduction to Valuation: the Time Value of Money

A professional rugby league player is offered a bonus of $150 000 if he completes a five year playing contract with an NRL club.If money is worth 7 per cent to him what is this bonus worth today?

The interest rate used to calculate the present value of future cash flows is called the:

Scott has $4800 that he wants to invest for 3 years.He can invest this amount at his credit union and earn 4 per cent simple interest;or he can open an account at Trust Bank and earn 3.65 per cent interest,compounded annually.If he decides to invest at Trust Bank for 3 years,he will:

The relationship between the present value and the time period is best described as:

Isaac only has $690 today but needs $800 to buy a new laptop.How long will he have to wait to buy the laptop if he earns 5.4 per cent compounded annually on his savings?

A financially wise individual would prefer a loan based on __________ interest and an investment earning __________ interest.

Your parents spent $6200 to buy 500 shares in a company listed on the ASX 13 years ago.The stock has appreciated 9 per cent per year on average.What is the current value of those 500 shares?

The process of accumulating interest in an investment over time to earn more interest is called:

Today,Tony is investing $16 000 at 6.5 per cent,compounded annually,for 4 years.How much additional income could he earn if he had invested this amount at 7 per cent,compounded annually?

Roger just deposited $13 000 into his account at Market Place Bank.The bank will pay 2.3 per cent interest,compounded annually,on this account.How much interest on interest will he earn over the next 15 years?

Todd will be receiving a $10 000 bonus one year from now.The process of determining how much that bonus is worth today is called:

Terry invested $2000 today in an investment that pays 6.5 per cent annual interest.Which one of the following statements is correct,assuming all interest is reinvested?

Given a rate of return of zero,the future value of a lump sum invested today will always:

By definition,a bank that pays simple interest on a savings account will pay interest:

The Monthly Bank pays 3 per cent interest,compounded monthly,on their savings accounts.The Daily Bank pays 3 per cent interest,compounded daily,on their savings accounts.You want to have $1000 saved in an account two years from today.The amount you must deposit today in a lump sum to achieve your goal will be:

Sue needs to invest $3626 today in order for her savings account to be worth $5000 six years from now.Which one of the following terms refers to the $3626?

You just won $25 000 and deposited your winnings into an account that pays 6.2 per cent interest,compounded annually.How long will you have to wait until your winnings are worth $50 000?

All else constant,the present value will __________ as the period of time decreases,provided there is an interest rate greater than zero.

Today you invest $1000 in a credit union that pays 5 per cent simple interest.How much will you have accumulated in 4 years?

The present value of $10 000 to be received in 10 years will __________ if the discount rate is increased.