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

Imagine that someone offers you $X today or $1,500 in 5 years.If the interest rate is 4 percent,then you would prefer to take the $X today if and only if

The rule of 70 can be stated as follows: A variable with a growth rate of X percent per year

Suppose you own a savings bond that will pay you $100 in 7 years.If the annual interest rate is 2%,what is the present value of the savings bond?

Halvorson Construction has an investment project that would cost $150,000 today and yield a one-time payoff of $167,000 in three years.What is the highest interest rate at which Halvorson would find this project profitable?

At which interest rate is the present value of $260.10 two years from today equal to $250 today?

Suppose the interest rate is 4 percent.Which of the following has the greatest present value?

You are considering buying a share of stock in XYZ Corporation.At the end of years 1,2,and 3 the stock will pay you a dividend of $15.In addition,at the end of the third year you expect to sell the share of stock for $100.If the interest rate is 3%,how much is the share of XYZ stock worth to you today?

At an annual interest rate of 20 percent,about how many years will it take $100 to triple in value?

If the interest rate is 4.5 percent,what is the present value of a payment of $500 to be made one year from today?

La Rossa Pasta Company is considering expanding its factory.In which case would both the change in the cost and the change in the interest rate each make it less likely that La Rossa's would expand?

Suppose the interest rate is 5 percent.Consider three payment options: 1)$500 today. 2)$520 one year from today. 3)$550 two years from today. Which of the following is correct?

A firm has four different investment options.Option A will give the firm $10 million at the end of one year,$10 million at the end of two years,and $10 million at the end of three years.Option B will give the firm $5 million at the end of one year,$10 million at the end of two years,and $15 million at the end of three years.Option C will give the firm $15 million at the end of one year,$10 million at the end of two years,and $5 million at the end of three years.Option D will give the firm $21 million at the end of one year,nothing at the end of two years,and $9 million at the end of three years.Which of these options has the highest present value if the rate of interest is 5 percent?

At which interest rate is the present value of $145.80 two years from today equal to $125 today?

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

Which,if any,of the present values below are correctly computed?

Susan put $375 into an account and one year later had $405.What interest rate was paid on Susan's deposit?

At which interest rate is the present value of $35.00 two years from today equal to about $30.00 today?

Using the rule of 70,about how much would $100 be worth after 50 years if the interest rate were 7 percent?

At which interest rate is the present value of $360 three years from today equal to about $310 today?

Mixster Concrete Company is considering buying a new cement truck.The owners and their accountants decide that this is the profitable thing to do.Before they can buy the truck,the interest rate and price of trucks change.In which case do these changes both make them less likely to buy the truck?