Exam 5: Time Value of Money-The Basics

When using a financial calculator, which of the following is a correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 2% compounded quarterly?

The annual percentage rate (APR) is calculated as

You just purchased a parcel of land for $10,000. If you expect a 12% annual rate of return on your investment, how much will you sell the land for in 10 years?

Assuming two investments have equal lives, a high discount rate tends to favor

All else constant, the present value of an investment will increase if

Money has a greater time value time value

Which of the following is the formula for compound value?

If we invest money for 10 years at 8% interest, compounded semi-annually, we are really investing money for 20 six-month periods, during which we receive 4% interest each period.

A monthly credit card interest rate of 1.5% is equal to and effective annual rate of 19.56%.

As the compound interest rate increases, the present value of future cash flows decreases.

What is the present value of $12,500 to be received 10 years from today? Assume a discount rate of 8% compounded annually and round to the nearest $1.00.

If you want to have $90 in four years, how much money must you put in a savings account today? Assume that the savings account pays 8.5% and it is compounded monthly (round to the nearest $1).

When using a financial calculator, which of the following is the correct way to find the future value of $200 deposited today in an account for four years paying annual interest of 3%?

An increase in ________ will decrease present value.

When using EXCEL to find the future value of $2,000 invested in an account that would earn interest of 7.5% for 18 years, the correct entry would be

The present value of a future sum of money increases as the number of years before the payment is received increases.

Shorty Jones wants to buy a one-way bus ticket to Mule-Snort, Pennsylvania. The ticket costs $142, but Mr. Jones has only $80. If Shorty puts the money in an account that pays 9% interest compounded monthly, how many months must Shorty wait until he has $142 (round to the nearest month)?

An increase in future value can be caused by

If you want to have $1,700 in seven years, how much money must you put in a savings account today? Assume that the savings account pays 6% and it is compounded quarterly (round to the nearest $10).

Which of the following provides the greatest annual interest?