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Exam 25: Time Value of Money

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Question 41

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The number of periods in a present value calculation may only be expressed in years.

A) True
B) False

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Question 42

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Future value can be found if the interest rate (i),the number of periods (n),and the present value (p)are known.

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B) False

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Question 43

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An ________ is a series of equal payments occurring at equal intervals.

To calculate present value of an amount,two factors are required: The ________ and the________.

How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$ A)4 years B)5 years C)6 years D)2 years E)10 years

From the perspective of an account holder,a savings account is a liability with interest.

The present value factor for determining the present value of $6,300 to be received three years from today at 10% interest compounded semiannually is 0.7462.(PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

The present value of eight $5,000 semiannual payments invested for 4 years at 8% compounded semiannually is $33,663.50.(PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

Molly borrows money by promising to make a single payment of $100,000 at the end of 5 years.How much money is Molly able to borrow if the interest rate is 10%,compounded semiannually? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

Which column (i) and row (n) would you use from a present value or future value table for 8% interest compounded quarterly for 6 years?

Garcia Brass Fixtures is planning on replacing one of its machines in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1.The deposits will earn 10% interest.How much money will Garcia have accumulated at the end of five years to replace the machine?

Define interest.

Interest may be defined as:

The Masterson family is setting up a vacation fund,and they plan on depositing $1,000 per quarter in an investment that will pay 12% annual interest.What amount will they have available for their vacation at the end of 2 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

A company is setting up a sinking fund to pay off $8,654,000 in bonds that are due in 7 years.The fund will earn 7% interest,and the company intends to put away a series of equal year-end amounts for 7 years.What is the amount of the annual deposits that the company must make?

A company is beginning a savings plan to purchase a new building.It will be saving $43,000 per year for the next 10 years.How much will the company have accumulated after the tenth year-end deposit,assuming the fund earns 9% interest?

A company has $46,000 today to invest in a fund that will earn 4% compounded annually.How much will the fund contain at the end of 6 years?

A company has $46,000 today to invest in a fund that will earn 4% compounded annually.How much will the fund contain at the end of 6 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

A company is considering an investment that will return $22,000 semiannually at the end of each semiannual period for 4 years.If the company requires an annual return of 10%,what is the maximum amount it is willing to pay for this investment? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$

Marc Lewis expects an investment of $25,000 to return $6,595 annually.His investment is earning 10% per year.How many annual payments will he receive? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s) from the tables provided.) }}$