Exam 3: Understanding and Appreciating the Time Value of Money

Two of the most important factors in reaching your financial goals are the return on your investments and the length of time you have until you need your money.

The dollar value of an investment at some future point in time is also known as

What annual rate must be earned to turn $50,000 into $250,000 in 15 years?

Your great-uncle placed $500 a year in a bank account for your "college fund" for each of the last 18 years.How much is now in your college account (at the end of the eighteenth year)if your account earned an annual rate of return of 6%?

Which one of the following is the "enemy" of compound interest and makes it very difficult to reach your financial goals?

The earlier you begin saving for your retirement,the easier it will be to reach your financial goals for retirement.

If he sticks to the plan,Enrique's savings will grow to approximately ________ by age 62.

Consider that you are paying back a fully amortized loan.Which of the following statements is most correct?

Present value lets us compare dollar values from different time periods.

What is the price you would be willing to pay today for an IOU for $500 due in one year if you want to earn at least 16%?

In an amortized loan the earlier payments have a larger portion of the payment going to pay interest and a smaller portion of the payment to pay down the principle.

Why should you care about the power of compounding and the time value of money?

The current value in today's dollars of a future sum of money is called

If he sticks to this plan,Arnold's savings will have grown to approximately ________ by age 62.

You just purchased a premier lot in an exclusive neighborhood for your future home.The lot cost $50,000,an amount you financed with a 96-month loan.If your interest rate is 9.25 percent compounded monthly,which of the following is closest to your monthly payment?

You invest $1,000 at age 20 at an annual rate of return of 12%.By the time you are 62 you will have amassed approximately

What is the present value of $500 received at the end of each of the next five years worth to you today at the appropriate discount rate of 6 percent?

You have just remembered that four years ago you placed $1,000 in a bank account.If the bank was paying an annual rate of return of 8% during that time,how much should you have in your forgotten account?

How much did you borrow if your annual payments are $5,000 for the next seven years and the interest rate is 9%?

A perpetuity is an annuity where the payments