Exam 5: Time Value of Money-The Basics

An investor will invest $1,000 now and expect to receive $10 for each of the next 10 years plus $1,000 at the end of the 10th year.Her cash flow at time period 0 is

A timeline represents the value of a sum invested now at the end of a series of time periods.

If you purchased a share of Mico.com stock on March 1,1993 for $45 and you sold the stock at $168 on February 28,1998,what was your annual rate of return on the stock?

Use the following information to answer the following question(s). A Max,Inc.deposited $2,000 in a bank account that pays 12% interest annually. -What will the dollar amount be in four years,assuming that interest is paid annually?

How many periods would it take for the deposit to grow to $6,798 if the interest is compounded semiannually?

Timelines are always expressed in years.

When calculating either discount rates or the number of periods using a financial calculator,the PV and FV must have opposite signs.

The effective annual rate increases when the ________ increases.

A diagram for visualizing future cash flows is known as

When using EXCEL to find the future value of $2,000 invested in an account that would earn interest of 7.5% for 18 years,the correct entry would be

A timeline is a linear representation of the timing of cash flows.

If you put $600 in a savings account that yields an 8% rate of interest compounded weekly,what will the investment be worth in 37 weeks (round to the nearest dollar)?

How many years will it take for an initial investment of $200 to grow to $544 if it is invested today at 8% compounded annually?

As the compound interest rate increases,the present value of future cash flows decreases.

You deposit $5,000 today in an account drawing 12% compounded quarterly.How much will you have in the account at the end of 2 1/2 years?

Assuming two investments have equal lives,a high discount rate tends to favor

You bought a painting 10 years ago as an investment.You originally paid $85,000 for it.If you sold it for $484,050,what was your annual return on investment?

Dawn Swift discovered that 20 years ago,the average tuition for one year at an Ivy League school was $4,500.Today,the average cost is $29,000.What is the growth rate in tuition cost over this 20-year period? Round off to the nearest 0.1%.

Stephen's grandmother deposited $100 in an investment account for him when he was born,25 years ago.The account is now worth $1,500.What was the average rate of return on the account?

An increase in future value can be caused by an increase in the