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

Ben invested $5000 twenty years ago with an insurance company that has paid him 5 per cent simple interest on his funds.Charles invested $5000 twenty years ago in a fund that has paid him 5 per cent interest,compounded annually.How much more interest has Charles earned than Ben over the past 20 years?

Jamie deposits $1000 into an account paying 6 per cent interest,compounded annually. At the same time,Amy deposits $1000 into an account paying 3 per cent interest,compounded annually.Over a five-year period:

You and your brother are planning a large anniversary party 3 years from today for your grandparents' 50^th wedding anniversary.You have estimated that you will need $2500 for this party.You can earn 3.5 per cent compounded annually on your savings.How much would you and your brother have to deposit today in one lump sum to pay for the entire party?

Mavis invests $10 000 today in a managed fund to supplement her employer funded superannuation scheme.She expects to earn 8 per cent,compounded annually,on her money for the next 26 years.After that,she wants to be more conservative,so only expects to earn 5 per cent,compounded annually.How much money will she have in her account when she retires 38 years from now,assuming this is the only deposit she makes into the fund?

You want to invest an amount of money today and receive back twice that amount in the future.You expect to earn 8 per cent interest.Approximately how long must you wait for your investment to double in value?

How long will it take to double your savings if you earn 3.6 per cent interest,compounded annually?

If you invest $5000 now,and your investment pays 12% per annum,how much will you have in three years if compounded annually (to the nearest dollar)?

What is the future value of $4900 invested for 8 years at 7 per cent compounded annually?

Over time,the future value of $1000 invested today at 6 per cent,compounded annually,will increase by:

Interest earned on both the initial principal and the reinvested interest from prior periods is called:

Lisa has $1000 in cash today.Which one of the following investment options is most apt to double her money?

Thirteen years ago,you deposited $2400 into a superannuation fund.Eight years ago,you added an additional $1000 to this account.You earned 8 per cent,compounded annually,for the first 5 years,and 5.5 per cent,compounded annually,for the last 8 years.How much money do you have in your account today?

You expect to receive $12 000 at graduation one year from now.You plan on investing it at 8 per cent until you have $100 000.How long will you wait from now?

You have $50 000 now to invest.If you can earn 10% per annum on your deposit,and can invest for 5 years,what will be the future value of your deposit (to the nearest dollar)at the end of the investment period?

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

Sixty years ago,your grandparents opened two savings accounts and deposited $200 in each account.The first account was with Which Bank at 3 per cent,compounded annually.The second account was with Dragon Bank at 3.5 per cent,compounded annually.Which one of the following statements is true concerning these accounts?

The present value of a lump sum future amount:

Today,Courtney wants to invest less than $5000 with the goal of receiving $5000 back some time in the future.Which one of the following statements is correct?

Precision Engineering invested $110 000 at 6.5 per cent interest,compounded annually for 4 years.How much interest on interest did the company earn over this period of time?

The valuation calculating the present value of a future cash flow to determine its value today is called __________ valuation.