Dr. J
FINA
UBUS 310
Time Value of Money Review—3
____ 1. A perpetuity is best described as:
|a. |An annuity that goes on forever |
|b. |Requires the use of the CF or cash flow registers. |
|c. |Contains unequal cash flows from period to period |
|d. |all of the above |
____ 2. The present value of 100, 200 and 700 in years one through three, respectively:
|a. |Can be determined by using the
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What would the future value be if interest is compounded quarterly?
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____ 12. Refer to question 9. What would the future value be if interest is compounded monthly?
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____ 13. Refer to question 9. What would be the future value if interest is compounded weekly?
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____ 14. Refer to question 9. What would be the future value if interest is compounded daily?
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____ 15. A 12% return, compounded annually, has an effective annual return of 12.6%
|a. |True |
|b. |False |
____ 16. What is the most your firm should pay to receive the following cash flows if a 12% return is required?
|Year 1 |$5,000 |
|Year 2 |$8,000 |
|Year 3
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14. How close does the terminal value in part 2 get to the present value using the growing annuity formula in part 3?
a. What is the CD’s value at maturity (future value) if it pays 10 percent annual interest?
8. What is the net present value of the following cash flows discounted at 12%?
10. An investment of $1,000 today will grow to $1,100 in one year. What is the continuously compounded rate of return?
b) (5 points) Using the results from part a, obtain the interest rate, r, as a function of Y =K and the wage,
What is the future value of a $ 500 annuity payment over five years if interest rates are 9 percent? Recalculate the future value at 8 percent interest, and again at 10 percent interest.
A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today?
You deposit $1,000 in a savings account that pays 9 percent interest, compounded annually. How much will your account be worth in 6 years?
1. 2010 late-night talk show indicated the existence of an unclaimed municipal bond issued in 1883 by a town in Missouri. The bond was $100 with an interest rate on 10%. At a compound interest, what would be the bonds value in 2010.
(5 points) Qin deposits his first paycheck in the bank. The annual interest rate is 12%, but
for the unknown , where represents the lump sum and means the price of a zero coupon bond maturing at time t as seen at time 15. Prove that if the interest rates at retirement are 6% per year, then the annual payment are approximately £43,600, and then calculate the annual payments if the interest rates were to fall to 1%.
The total compounded value is Rs. 23.114 Future Value of Annuity Annuity is a term used to describe a series of periodic flows of equal amounts. These flows can be inflows or outflows. The future value of annuity is
Whenever an investment is made, there is an expectation to earn a return which can take the form of interest when the investment is in some form of monetary asset. If the interest earned is reinvested rather than withdrawn then the total amount invested grows at a compound rate. At the end of the life of the investment (at maturity) it will have a value F – the future or maturity value. If P is the amount invested today at r% with compound interest for t years then the future value will be F.