Exam 14: The Basic Tools of Finance: Present Value Measuring the Time Value of Money

Zoey wants to have about $750,000 when she retires in 10 years.She has $300,000 to deposit now.At which of the following interest rates would Zoey's deposit come closest to $750,000 after 10 years?

You have a contract with someone who has agreed to pay you $20,000 in four years.She offers to pay you now instead.For which of the following interest rates and payments would you take the money today?.

Suppose you purchase a savings bond today for $25.In seven years you may cash in the savings bond for $50.What is the approximate interest rate paid by the savings bond?

Other things the same,when the interest rate rises,the present value of future revenues from investment projects

Suppose you have a choice between receiving a lump-sum payment of $10,000 today or four annual payments of $2,750 (with the first payment one year from today).Of the following,which is the lowest annual interest rate at which you would prefer the lump-sum payment over the four annual payments?

The future value of a deposit in a savings account will be smaller

Suppose you will receive $500 at some point in the future.If the annual interest rate is 7.5 percent,then the present value of the $500 is

You are considering buying a share of stock in Company ABC.At the end of years 1,2,and 3 the stock will pay you a dividend of $10.In addition,at the end of the third year you expect to sell the share of stock for $200.If the interest rate is 5%,how much is the share of ABC stock worth to you today?

You could borrow $2,000 today from Bank A and repay the loan,with interest,by paying Bank A $2,154 one year from today.Or,you could borrow X dollars today from Bank B and repay the loan,with interest,by paying Bank B $2,477.10 one year from today.In order for the same interest rate to apply to the two loans,X =

The future value of $500 saved for two years at an interest rate of 5% is

Suppose you win a small lottery and you are given the following choice: You can receive (1)an immediate payment of $10,000 or (2)two annual payments,each in the amount of $5,200,with the first payment coming one year from now,and the second payment coming two years from now.You would choose to take the immediate payment of $10,000 if the interest rate is

If you put $400 into a bank account today and it promises to pay 5% interest for 6 years,how much is in the account at the end of the six years?

If the interest rate is 2.49 percent,then what is the present value of $5,000 to be received in 4 years?

If the interest rate is r percent,then the rule of 70 says that your savings will double about every

Which of the following changes would decrease the present value of a future payment?

Cleo promises to pay Jacques $1,000 two years from today.If the interest rate is 4 percent,then how much is this future payment worth today?

Your accountant tells you that if you can continue to earn the current interest rate on your balance of $750 for the next three years,you will have $944.78 in your account.If your accountant is correct,then what is the current interest rate?

According to the rule of 70,if the interest rate is 10 percent,about how long will it take for the value of a savings account to double?

HydroGrow is considering building a new greenhouse in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project

Jarrod says that the future value of $250 saved for one year at 6 percent interest is less than the future value of $250 saved for two years at 3 percent interest.Simon says that the present value of a $250 payment to be received in one year when the interest rate is 6 percent is less than the value of a $250 payment to be received in two years when the interest rate is 3 percent.