Exam 5: Time Value of Money-The Basics

Alva Thomas has decided to place $10,000 in an account payable to his alma matter when he dies. If the account grows at an annual rate of 6% compounded monthly and he lives for another 10 years, the university will receive

Which of the following is the formula for present value?

If you invest $450 today and it increases to $6,185 at the end of 20 years, what rate of return have you earned?

The present value of $1,000 to be received at the end of five years, if the discount rate is 10%, is

The time value of money is created by

If you put $700 in a savings account with a 10% nominal rate of interest compounded monthly, what will the investment be worth in 21 months (round to the nearest dollar)?

How much money must be put into a bank account yielding 5.5% (compounded annually) in order to have $250 at the end of five years (round to nearest $1)?

High discount rates favor

Timelines are always expressed in years.

When performing time value of money computations with a financial calculator or EXCEL, PV and FV must have opposite signs.

Financial managers use the time value of money to

If you want to have $1,200 in 27 months, how much money must you put in a savings account today? Assume that the savings account pays 14% and it is compounded monthly (round to the nearest $10).

At 8% compounded annually, how long will it take $750 to double?

A diagram for visualizing future cash flows is known as

Middletown, USA currently has a population of 1.5 million people. It has been one of the fastest growing cities in the nation, growing by an average of 4% per year for the last five years. If this city's population continues to grow at 4% per year, what will the population be 10 years from now?

If you place $50 in a savings account with an interest rate of 7% compounded weekly, what will the investment be worth at the end of five years (round to the nearest dollar)?

Stephen's grandmother deposited $100 in an investment account for him when he was born, 25 years ago. The account is now worth $1,500. What was the average rate of return on the account? Which of the following is a correct way to solve this problem using EXCEL?

A timeline is a linear representation of the timing of cash flows.

What is the present value of an investment that pays $400 at the end of three years and $700 at the end of 10 years if the discount rate is 5%?

If you want to have $875 in 32 months, how much money must you put in a savings account today? Assume that the savings account pays 16% and it is compounded monthly (round to the nearest $10).