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Exam 4: Time Value of Money 1: Analyzing Single Cash Flows

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Question 21

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What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually?

A) $2,550
B) $2,850
C) $2,950
D) $3,150

E) All of the above
F) B) and C)

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Question 22

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Which is more valuable,receiving $775 today or receiving $885 in 2.5 years if interest rates are 7.25 percent?

A) receiving $775 today
B) receiving $885 in 2.5 years
C) They are worth the same amount
D) Need more information to make a determination.

E) A) and B)
F) C) and D)

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Question 23

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The process of figuring out how much an amount that you expect to receive in the future is worth today is called

What is the value in year 6 of a $1,000 cash flow made in year 2 if interest rates are 5 percent in years 3 and 4,and increase to 6 percent in the remaining years?

If an average home in your town currently costs $350,000,and house prices are expected to grow at an average rate of 3 percent per year,what will an average house cost in "5" years?

You are scheduled to receive a $750 cash flow in one year,a $1,000 cash flow in two years,and pay a $300 payment in four years.If interest rates are 6 percent per year,what is the combined present value of these cash flows?

A deposit of $500 earns the following interest rates? 5 percent in the first year, 6 percent in the second year,and 8 percent in the third year. What would be the third year future value?

If an average home in your town currently costs $300,000,and house prices are expected to grow at an average rate of 5 percent per year,what will an average house cost in 10 years?

You have $50,000 in your account.Assuming no additional deposits are made and your account earns 8 percent per year,how long will it take for the account to have a balance of $500,000?

What annual rate of return is implied on a $700 loan taken next year when $800 must be repaid in year 3?

Approximately how many years does it take to double a $475 investment when interest rates are 8 percent per year?

You invested $2,000 in the stock market one year ago.Today,the investment is valued at $9,500.What return did you earn? What return would you need to suffer next year for your investment to be valued at the original $2,000?

You invested $5,000 in the stock market one year ago.Today,the investment is valued at $5,500.What return did you earn? What return would you suffer next year for your investment to be valued at the original $5,000?

What is the value in year 3 of a $10,000 cash flow made in year 20 if interest rates are 5 percent?

Ten years ago,Hailey invested $1,000 and locked in a 9 percent annual rate for 30 years (end 20 years from now) .Aidan can make a 20-year investment today and lock in an 8 percent rate.How much money should he invest now in order to have the same amount of money in 20 years as Hailey?

Five years ago,Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now) .James can make a 20-year investment today and lock in a 10 percent interest rate.How much money should he invest now in order to have the same amount of money in 20 years as Jane?

We call the process of earning interest on both the original deposit and on the earlier interest payments

How long will it take $4,000 to reach $4,500 when it grows at 8 percent per year?

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year?

A stock investor deposited $3,450 six years ago.Today the account is valued at $2,180.What annual rate of return has this investor earned?