Exam 14: Time Value of Money

A single amount of $10,500 is to be received in 3 years.If the single amount is discounted at 8% for 3 periods,the present value is ________.The present value of $1 for 3 periods at 8% is 0.794.The present value of an ordinary annuity of $1 for 3 periods at 8% is 2.577.(Round your final answer to the nearest dollar. )

On January 1,2018,bonds with a face value of $72,000 were sold.The bonds mature on January 1,2028.The face interest rate is 6%.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10%.What is the market price of the bonds on January 1,2018? The present value of $1 for 20 periods at 5% is 0.377.The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462.The present value of $1 for 20 periods at 3% is 0.554.The present value of an ordinary annuity of $1 for 20 periods at 3% is 14.878.(Round your final answer to the nearest dollar. )

In present value calculations,the process of determining the present value of a single sum of money is called:

The principal,when investing in a bond,is a single amount to be received by the investor and paid by the debtor at maturity.

You have received a settlement offer from a restaurant for your medical expenses due to food poisoning.The restaurant will pay you $110,000 in one lump sum two years from now.You can earn 10% on your investments.The present value of $1 for 2 periods at 10% is 0.826.The present value of an ordinary annuity of $1 for 2 periods at 10% is 1.736.The present value of the settlement offer is closest to:

The present value of a single amount in the future can be determined using a present value of $1 table.

The term time value of money refers to the fact that money earns interest over time.

What is the future value of a single $4,800 investment today that pays interest of 6% compounded annually for the next 3 years? (Round all intermediary calculations and final calculations to the nearest whole dollar. )

A single amount of $4700 is to be received in 3 years.If the single amount is discounted at 6% for 3 periods,the present value is ________.The present value of $1 for 3 periods at 6% is 0.840.The present value of an ordinary annuity of $1 for 3 periods at 6% is 2.673.(Round your final answer to the nearest dollar. )

The term present value means today's value of a future payment or a series of future payments,assuming that those payments include interest at the current market rate.

All of the following are necessary to compute the future value of a single amount EXCEPT the:

The term future value means the sum of money that an investment will be "worth" at a specified time in the future,assuming a certain interest rate.

The future value of an investment that pays interest will always be:

On January 1,2018,bonds with a face value of $100,000 were sold.The bonds mature on January 1,2028.The face interest rate is 6%.The bonds pay interest semiannually on July 1 and January 1.The market rate of interest is 10%.What is the market price of the bonds on January 1,2018? The present value of $1 for 20 periods at 5% is 0.377.The present value of an ordinary annuity of $1 for 20 periods at 5% is 12.462.The present value of $1 for 20 periods at 3% is 0.554.The present value of an ordinary annuity of $1 for 20 periods at 3% is 14.877.(Please show all work and round your final answer to the nearest dollar. )

Which of the following statements regarding the concept of present value is INCORRECT?

The interest paid on a bond is NOT an annuity because it occurs periodically.

You are calculating the present value of $10,000 that you will receive five years from now. Which table will you use to calculate the present value of that $10,000?

Tanko Financing leases phones to various companies for business use.Tanko has just signed a 2-year lease agreement that requires annual year-end lease payments of $340,000.The present value of $1 for 2 periods at 5% is 0.907.The present value of an ordinary annuity of $1 for 2 periods at 5% is 1.859.What is the present value of the lease when the lease commences using a 5% interest rate?

Smith Financing leases cars to car rental companies.Smith has just signed a 5-year lease agreement that requires annual year-end lease payments of $470,000.The present value of $1 for 5 periods at 6% is 0.747.The present value of an ordinary annuity of $1 for 5 periods at 6% is 4.212.What is the present value of the lease when the lease commences using a 6% interest rate?

An ordinary annuity is an investment that provides multiple receipts of an equal amount at fixed year-end intervals over the investment's duration.