Exam 6: Time Value of Money Concepts

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -At the end of each quarter,Patti deposits $500 into an account that pays 12% interest compounded quarterly.How much will Patti have in the account in three years?

In the future value of an ordinary annuity,the last cash payment will not earn any interest.

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

Briefly explain how you would arrive at the monthly payment for a 48-month loan where the first payment is due one month from the loan date.In your explanation,include the use of present or future value tables.

Use the following to answer questions Present and future value tables of 1 at 9% are presented below. -Mustard's Inc.sold the rights to use one of its patented processes that will result in cash receipts of $2,500 at the end of each of the next four years and a lump sum receipt of $4,000 at the end of the fifth year.The total present value of these payments if interest is at 9% is:

A deferred annuity is one in which interest charges are deferred for a stated time period.

An annuity is a series of equal periodic payments.

An investor purchases a 20-year,$1,000 par value bond that pays semiannual interest of $40.If the semiannual market rate of interest is 5%,what is the current market value of the bond?

Which of the following must be known to compute the interest rate paid from financing an asset purchase with an annuity?

Use the following to answer questions The note about debt included in the financial statements of Healdsburg Company for the year ended December 31,2015 disclosed the following: Debt.The following table summarizes the long-term debt of the Company at December 31,2015.All of the notes were issued at their face (maturity)value. Required: Assuming that the notes pay interest annually and mature on December 31 of the respective years,compute the following: -Suppose that Healdsburg enters into a sales contract with an auto manufacturer on January 1,2016,to provide tires that cost Healdsburg $18 million to produce.The buyer offers Healdsburg $6 million in cash and agrees to take over only the principal payment on Healdsburg's 6.55% debt notes.Assume that the going market interest is 7% at the time.What would Healdsburg's gross profit be on the sale?

Listed below are columns of time value of money tables for the 9% rate,followed by labels for five of the columns.Match the columns with their appropriate labels by placing the letter designating the column in the space provided by the label. _____ Present value of an annuity due of $1 _____ Future value of an annuity due of $1 _____ Present value of $1 _____ Future value of $1 _____ Present value of an ordinary annuity of $1

Compute the present value of the following single amounts to be received at the end of the specified period at the given interest rate.

Use the following to answer questions Present and future value tables of 1 at 9% are presented below. -Claudine Corporation will deposit $5,000 into a money market sinking fund at the end of each year for the next five years.How much will accumulate by the end of the fifth and final payment if the sinking fund earns 9% interest?

Column 5 is an interest table for the:

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -Rosie's Florist borrows $300,000 to be paid off in six years.The loan payments are semiannual with the first payment due in six months,and interest is at 6%.What is the amount of each payment?

Use the following to answer questions The note about debt included in the financial statements of Healdsburg Company for the year ended December 31,2015 disclosed the following: Debt.The following table summarizes the long-term debt of the Company at December 31,2015.All of the notes were issued at their face (maturity)value. Required: Assuming that the notes pay interest annually and mature on December 31 of the respective years,compute the following: -Suppose that Healdsburg renegotiates the 8% notes on December 31,2021,when the going interest rate is 8%.Healdsburg agrees to make 12 equal annual installments,commencing on December 31,2022,rather than pay the annual interest payments and the $225 million in a lump sum at maturity.What would the annual payments be?

Use the following to answer questions Present and future value tables of 1 at 9% are presented below. -Ajax Company purchased a five-year certificate of deposit for its building fund in the amount of $220,000.How much should the certificate of deposit be worth at the end of five years if interest is compounded at an annual rate of 9%?

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -Sondra deposits $2,000 in an IRA account on April 15,2016.Assume the account will earn 3% annually.If she repeats this for the next nine years,how much will she have on deposit on April 14,2023?

LeAnn wishes to know how much she should invest now at 7% interest in order to accumulate a sum of $5,000 in four years.She should use a table for the:

Use the following to answer questions Present and future value tables of $1 at 3% are presented below: -Debbie has $368,882 accumulated in a 401K plan.The fund is earning a low,but safe,3% per year.The withdrawals will take place annually starting today.How soon will the fund be exhausted if Debbie withdraws $30,000 each year?