Exam 28: The Time Value of Money: Future Amounts and Present Values

Sam Rivers has $3,000 to invest.He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually.Which option should he select?

The future value of an annuity is:

Joan is 75 years old and wishes to retire.She needs to have $48,000 a year plus her social security to live in the style she is accustomed to.She would like to have enough money in her retirement account which earns 5% compounded annually to support her for the next 15 years.How much must be in the fund if she takes the first payment at year-end?

(a)How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b)How long will it take if she invests the same amount at 4% semi-annually?

An annuity due assumes the cash flow will occur at the beginning of the period.

A scholarship fund has $75,000 to invest now to provide scholarships to high school students.They want to have at least $150,000 in 8 years.What rate of interest must they invest this money at to reach their goal?

If I invest $20,000 at 2.5% today,how long will it take to reach a minimum of $50,000 compounded semi-annually?

The obligation for deferred income taxes is the only long-term liability that is not reported at its present value.

A note that does not include an interest rate should be recorded at:

The difference between the present value and the future value of a sum of money depends upon:

If I invest $100 at the end of each year for four years at 6% how much will I have at the end of the fourth year?

The market price of a bond is equal to its present value.

If I invest $50,000 today for 5 years and it grows to $84,253,what rate of interest have I received?

The present value of an ordinary annuity is the amount that equal payments made at the end of successive equal periods is worth today.

If you receive $20,000 as a gift and invest it at 12% compounded quarterly,how much will you have at the end of three years?

Joe Notsosmart invested $10,000 at 8% simple interest for 5 years.How much more would he have received if he had received compound interest annually at the same rate?

Financial instruments are recorded at:

Discounting a future amount of a cash receipt will determine the present value of that receipt.

Powers Company wishes to issue $2,000,000 of 8%,10 year bonds which pay interest semi-annually.The current discount rate is 6%.What amount should the bonds sell for?

Belle invests $200 at the end of each year in a savings account which pays 5% annually.How much will Belle have at the end of 5 years?