Exam 5: Time Value of Moneythe Basics

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).

Discounting is the reverse of [blank].

If you invest $450 today and it increases to $6185 at the end of 20 years, what rate of return have you earned?

What will the dollar amount be in four years, assuming that interest is paid annually?

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.

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.

Dawn Swift discovered that 20 years ago, the average tuition for one year at an Ivy League school was $15,000.Today, the average cost is $60,000.What is the growth rate in tuition cost over this 20-year period?

At what rate must $400 be compounded annually for it to grow to $716.40 in 10 years?

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?

If you deposit $1000 each year in a savings account earning 4%, compounded annually, how much will you have in 10 years?

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

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?

As the discount rate increases, the present value of future cash flows increases.

Assuming two investments have equal lives, a high discount rate tends to favour [blank].

The future value of a lump sum deposited today increases as the number of years of compounding at a positive rate of interest declines.

Briefly discuss how non-annual compounding (more than one compounding period per year)is preferable to annual compounding if you are an investor.

If you want to have $1200 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).

Earnings per share for XYZ, Inc.grew constantly from $7.99 in 1974 to $12.68 in 1980.What was the compound annual growth rate in earnings per share over the period?

The time value of money is created by [blank].

The present value of a single sum [blank].