Once you have answered the questions, click on Submit Answers for Grading to get your results. Future value of an annuity D. Which of the following provides the greatest annual yield? If the bank has promised Ms. In 5 years at 6 percent? The compound annual interest rate implied by this arrangement is closest to 8 percent. In a typical loan amortization schedule, the dollar amount of interest paid each period. In 40 years at 12 percent? Assume that you work for your employer for another twenty years and that the applicable discount rate is 5%.
To fully understand time value of money one must first understand a few terms. What amount could you pay at the end of each year annually for 10 years to achieve this same objective? What rate of return will Dr. Assume that the savings account pays 7% and it is compounded quarterly. It is estimated that the machine can be disposed of at its net book value at the end of its life. If you could earn 12 percent annually, would you still choose the same alternative. The insurance company informs you that you have two options for receiving the insurance proceeds.
Time value of money can also be used to compute such useful information as car, mortgage and other loan payments. Each time there is a compounding period the new principal is increased by the interest from the previous period. Stein need to achieve this goal? The deposit is to earn interest annually at the rate of 9 percent for seven years. He has excellent managerial skills to lead a team. We multiple a given future value by this in order to get its present value equivalent. Chapter 3 Multiple-Choice Quiz Multiple-Choice Quiz Chapter 3: The Time Value of Money Just click on the button next to each answer and you'll get immediate feedback.
What sum of money lent out at compound interest will amount to Rs. If a 7 percent interest rate is applied, what is the current value of the future payments. Solving for an annuity Betty Bronson has just retired after 25 years with the electric company. Present value of an annuity B. With a compound annual interest rate of 5 percent? At what rate percent per annum will a sum of Rs.
The difference in the interests received from two different banks on Rs. The difference in simple interest on a certain sum of money for 3 years and 5 years at 18% per annum is Rs. You are conservative and expect to earn 4. The capacity of the machine will be 6 million items for the first two years but this will fall to 5 million items in years 3 and 4. Explanations of common financial dealings in which the time value of money is an important consideration, such as annuities, loan amortization and tax deferral options, are included to help illustrate the concept of the time value of money in everyday life. If the number representing the rate of interest in percent and time in years be equal, then time, for which the principal is lent out, is: a 5 ½ years b 6 ½ years c 7 years d 7 ½ years Ans. What table would you use to calculate the value of this contract in today's dollars? A 'debt trap' means: a inability to repay credit amount b ability to pay credit amount c overspending till no money is left d none of these 10.
Capital budgeting techniques and cash flows analysis quiz has 56 multiple choice questions. When current interest rates are different from expected future rates. How much did he borrow at each rate? Had it been put at 3% higher rate, it would have fetched Rs. Time value of money is based on the principle of compound interest. Rule 415 the Rule of 72 the Rule of 78 Rule 144 12.
How much will you have after 5 years? Cost of capital quiz has 53 multiple choice questions. Before preserving your articles on this site, please read the following pages: 1. Overview of financial management and environment quiz has 99 multiple choice questions. A sum of money doubles itself at compound interest in 15 years. He then withdraws the funds on an equal annual basis for the next 4 years. All of the above 6. Find the simple interest and the amount on Rs.
How much would she have to invest today with an annual rate of return equal to 15 percent? Which of the following cash-inflow streams should you prefer? A future dollar is always less valuable than a dollar today if interest rates are positive. The plan anticipates earning 9% interest. This article will explain the financial concept of time value of money. Present value of a single amount C. The money will be used for his son's 17 years from now.
In addition, other concepts that relate to factors that can impede the growth in value of money over time are explained, including risk, inflation and accessibility of assets. These principles include future value of money, present value of money, simple interest and compound interest. Future value of an annuity D. Assume that the account earns 5. How large are the monthly payments? You can use to roughly estimate how many years a given sum of money must earn at a given compound annual interest rate in order to double that initial amount. With the certificate of deposit, you make an initial investment at the beginning of the first year.
What single payment could be made at the beginning of the first year to achieve this objective? Authenticity We write all our papers from scratch and never plagiarize at all. What is the payback period for the machine? Gary Kiraly wants to buy a new Italian sports car in three years. Its basic premise is that money gains value over time. His mortgage is for 25 years. Assume that the savings account pays 8.