Ch04 Time Value Of Money practice questions_w_solution

Question 3 All else held constant, the future value of an annuity due will decrease O not change increase if you decrease the interest rate.

How would an increase in the interest rate effect the present value of an annuity problem (all other variables remain the same)

Which of these will increase the present value of an amount to be received sometime in the future?   Group of answer choices Increase in the discount rate. Increase in the time until the amount is received. Decrease in the interest rate Decrease in the future value

What is compounding?    Question 21 options:   The process of calculating the present value from the future value.   Earning interest on interest   The difference between present value and future value   Earning interest over one period

Which of the following changes would increase the present value of a future payment? (check all that apply) Decrease in the number of years until the future payment is received Increase in the interest rate Increase in the amount of the payment Decrease in the interest rate Increase in the number of years until the future payment is received

A financial analyst is treating a cash flow stream as a perpetuity.  The present value of the perpetuity will  __________ (increase, decrease, or not change)  if the interest rate increases, and will  ___________ (increase, decrease,  or not change) if the growth rate increases.

How would an increase in the interest rate or a decrease in the number of periods until the payment is received affect the present value (PV) of a sum of money?   Please explain properly. Thank you!

3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called four time-value-of-money variables. Which of the following is not one of these variables? The trend between the present and future values of an investment The duration of the deposit (N) The interest rate (t) that could be earned by deposited funds The present value (PV) of the amount deposited This process requires knowledge of the values of three of 4

Time value of money calculations can be solved using a mathematical equation, a financial calculator, or a spreadsheet. Which of the following equations can be used to solve for the future value of an annuity due? PMT x {[(1 + r)ª − 1]/r} x (1 + r) O FV/(1 + r)¹ PMT x {[(1 + r)" - 1]/r} O PMT x ({1 - [1/(1 + r)"]}/r) x (1 + r)

Which of the following is false? I. A lower interest rate would increase the present value of an investment. II. With compound interest method, interest is earned every period only on the orginal starting amount. III. "PMT" in the FVA formula tells us the periodic mortage payments for a fixed-rate fully amortized loan. O A. I, II, and III O B. III only O C. II and III only D. I only

→ Question 1 A usually involves some constant periodic payment which pays for both interest and principle over some specified period of time. Question 2 A involves some constant periodic payment which pays for interest over some period of time and a lump sum final payment at the end of the term .

Questions: 1. Using simple interest computations, find the future value of $3,620 at 2 38%/2 38% 2. Now, using compound interest computations, find the future value of $3,620 at 2 38%/2 38% Time Value of Money Solver). Show what you put into the calculator for your work. 3. Now, using compound interest computations, find the future value of $3,620 at 2 38%/2 38% Time Value of Money Solver). Show what you put into the calculator for your work. 4. Explain why the future values are different in questions 1-3. Explain who would benefit from more frequent compounding. Who would be at a disadvantage from more frequent compounding.

An decrease in the interest rate will: Multiple select question. increase the future value decrease the present value decrease the future value increase the present value

19. How would a decrease in the interest rate effect the future value of a lump sum, single amount problem (all other variables remain the same)? A. Increase the time needed to save.B. Increase the present value.C. Decrease the present value.D. Increase the future value.E. Decrease the future value.

march eacg Letter to the correct  number answer  to the left: 1.       Interest 2.       Monetary asset 3.       Compound interest 4.       Simple interest 5.       Annuity 6.       Present value of a single amount 7.       Annuity due 8.       Future value of a single amount 9.       Ordinary annuity 10.   Effective rate or yield 11.   Nonmonetary asset 12.   Time value of money 13.   Monetary liability     1.       ______ 2.       ______ 3.       ______ 4.       ______ 5.       ______ 6.       ______ 7.       ______ 8.       ______ 9.       ______ 10.   ______ 11.   ______ 12.   ______ 13.   ______ a.       First cash flow occurs one period after agreement begins b.       The rate at which money will actually grow during a year c.       First cash flow occurs on the first day of the agreement d.       The amount of money that a dollar will grow to e.       Amount of money paid/received in excess of amount borrowed/lent f.        Obligation to pay a sum of cash, the amount of which…

Listen The future value of $100 deposited today (assuming positive interest rates and a time difference between the present and the future): 1) will always be less than $100. 2) will always be equal to $100. 3) will always be greater than $100. depending on the exact interest rate and on the precise amount of time difference between the present and the future, can be less than $100, greater than $100, or equal to $100. 5) None of the statements above are correct. 4)

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Which of the following statements is true about the present value factors? a. The present value factor is the reciprocal of the present value of annuity due factor. b. The present value factor decreases as the interest rate decreases. c. The present value factor is also known as the discount factor. d. The present value factor should always be greater than 1.

Which one pays more (for the same amount and same interest rate), a saving account with a simple interest rate or with compounded interest rate?

Which one of these statements related to growing annuities and perpetuities is correct?     In computing the present value of a growing annuity, you discount the cash flows using the growth rate as the discount rate.   You can compute the present value of a growing annuity but not a growing perpetuity.   The future value of an annuity will decrease if the growth rate is increased.   An increase in the rate of growth will decrease the present value of an annuity.   The present value of a growing perpetuity will decrease if the discount rate is increased.

The future value of a deposit will increase with the interest rate it earns and the number of years it saves for, other things held constant. Question 24 options: True False

sheet. _is the excess of resources (usually cash) received or paid over the amount of resources 1. loaned or borrowed. 2. is the interest paid on both the principal and the amount of interest accumulated in prior periods. 3. Future value interest factor (FVIF) is represented by the formula 4. An installment that requires a buyer to pay equal payments at a certain period is called. 5. _means that individuals maximize returns for a given level of risk or minimize risk if the returns are the same. 6. The basic decision rule is to accept the project if the net present value is 7. If the cash flow stream lasts forever or is indefinite, then it is called 8. If payment is made and interest is computed at the end of each payment interval, then it is called 9. One way to reduce risk to an acceptable level is through wherein you invest in different types of investments with different risks and returns. 10. If the cash flow happens at the beginning of each period, then it is called.

Problem 4-6 ignore annuity due and redo problem 4-6 by changing the word FVA to PVA.