Exam 5: Time Value of Moneythe Basics

An investor will invest $1000 now and expect to receive $10 for each of the next 10 years plus $1000 at the end of the 10th year.Her cash flow at time period 0 is [blank].

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

Which of the following statements is false?

You are considering two investments.Investment A yields 10% compounded quarterly.Investment B yields i% compounded semi-annually.Both investments have equal annual yields.Find i.

Three years from now, Ari will purchase a laptop computer that will cost $2250.Assume that Ari can earn 6.25% (compounded monthly)on her money.How much should she set aside today for the purchase? Round off to the nearest $1.

What is the annual compounded interest rate of an investment with a stated interest rate of 6% compounded quarterly for seven years (round to the nearest .1%)?

How many years will it take for an initial investment of $200 to grow to $544 if it is invested today at 8% compounded annually?

What is the present value of $1000 to be received 10 years from today? Assume that the investment pays 8.5% and it is compounded monthly (round to the nearest $1).

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).

Compare and contrast the APR and EAR.