Exam 5: Time Value of Money-The Basics

Earnings per share for XYZ,Inc.grew constantly from $7.99 in 1974 to $12.68 in 1980.What was the compound annual growth rate in earnings-per-share over the period?

All else constant,the present value of an investment will increase if

At 8%,compounded annually,how long will it take $750 to double?

When using a financial calculator,which of the following is a correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 2% compounded quarterly?

As the number of compounding periods per year increase,the annual percentage rate of interest increases.

If we invest money for 10 years at 8% interest,compounded semi-annually,we are really investing money for 20 six-month periods,during which we receive 4% interest each period.

The present value of $1,000 to be received at the end of five years,if the discount rate is 10%,is

Three years from now,Barbara Waters will purchase a laptop computer that will cost $2,250.Assume that Barbara can earn 6.25% (compounded monthly)on her money.How much should she set aside today for the purchase? Round off to the nearest $1.

The first amount on a timeline represent the present value of all the future amounts at a given interest rate.

California Investors recently advertised the following claim: Invest your money with us at 21%,compounded annually,and we guarantee to double your money sooner than you imagine.Ignoring taxes,how long would it take to double your money at a nominal rate of 21%,compounded annually? Round off to the nearest year.

Briefly discuss how non-annual compounding (more than one compounding period per year)is preferable to annual compounding if you are an investor.

When using a financial calculator,which of the following is a correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 2% compounded quarterly?