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

Of the following interest rates,which is the highest one at which the present value of $200 ten years from today is greater than $150?

Black Oil Company considered building a service station in a new location.The owners and their accountants decided that this was the profitable thing to do.However,soon after they made this decision,both the interest rate and the cost of building the station changed.In which case do these changes both make it less likely that they will now build the station?

According to the rule of 70,if a person's saving doubles in 10 years,what interest rate were they earning?

Suppose Emilio offers you $500 today or $X in 10 years.If the interest rate is 6 percent,then at what value of X would you be indifferent between the two options?

Marcia has four savings accounts.Which account has the largest balance?

Assuming the interest rate is 5 percent,which of the following has the greatest present value?

Rita puts $10,000 into each of two different assets.The first asset pays 10 percent interest and the second pays 5 percent.According to the rule of 70,what is the approximate difference in the value of the two assets after 14 years?

Twenty years ago,Dr.Montgomery borrowed money from her parents to pay her tuition at graduate school.Now she wants to pay them back.She gives them double what they gave her.According to the rule of 70,what interest rate would have given her parents the same amount of money if they had put it in the bank rather than lending it to their daughter?

What is the present value of a payment of $100 to be made one year from today?

The price of a bond is equal to the sum of the present values of its future payments.Suppose a certain bond pays $50 one year from today and $1,050 two years from today.What is the price of the bond if the interest rate is 5 percent?

Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 6 percent?

You are expecting to receive $750 at some time in the future.Which of the following would unambiguously decrease the present value of this future payment?

The present value of a future payment to be received in three years is $1,000.If the interest rate is 5%,what is the amount that will be paid in three years?

Three people go to the bank to cash in their accounts.Amy had her money in an account for 25 years at 4 percent interest.Bill had his money in an account for 20 years at 5 percent interest.Celia had her money in an account for 5 years at 20 percent interest.If each of them originally deposited $500 in their accounts,which of them gets the most money when they cash in their accounts?

Suppose the interest rate is 10 percent.Which of the following payments has the largest present value?

A judge requires Harry to make a payment to Sally.The judge says that Harry can pay her either $10,000 today or $11,000 two years from today.Of the following interest rates,which is the lowest one at which Harry would be better off paying $11,000 two years from today?

Bert put $75 into an account and one year later had $100.What interest rate was paid on Bert's deposit?

Suppose you are deciding whether to buy a particular bond.If you buy the bond and hold it for 4 years,then at that time you will receive a payment of $10,000.If the interest rate is 6 percent,you will buy the bond if its price today is no greater than

Suppose you put $500 into a bank account today.Interest is paid annually and the annual interest rate is 5.5 percent.The future value of the $500 is

Albert Einstein once referred to compounding as