The present value of a lump sum future amount: O A. increases as the interest rate decreases. O B. decreases as the time period decreases. OC. is inversely related to the future value. O D. is directly related to the interest rate.

The present value of a lump sum future amount: O A. increases as the interest rate decreases. O B. decreases as the time period decreases. OC. is inversely related to the future value. O D. is directly related to the interest rate.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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How can we determine the Net Present-Worth Amounts at Varying Interest Rates?
A. Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? FV = (1 + I)NN / PV FV = PV / (1 + I)NN FV = PV x (1 + I)NN B. Simple interest? FV = PV + (PV x I x N) FV = PV - (PV x I x N) FV = PV / (PV x I x N) C. Identify whether the following statements about the simple and compound interest methods are true or false. Statement True False After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. All other variables held constant, investments paying simple interest have to pay significantly higher interest rates to earn the same amount of interest as an account earning compound…
The formula for calculating the discount rate to use in net present value (NPV) calculations is as follows PV = 1+ (1+r)" Where 'r represents: OA. The number of years you are investing B. The initial investment OC. The number of years - stated as a decimal D. The cost of capital stated as a decimal
Question 3.Match the following terms with the appropriate definition.Future ValueTime value of moneyMonetary AssetPresent value of a single amountSimple interestA.Claim to a fixed amount of cash.B.A dollar now is worth more than a dollar later.C.Based on initial investment only.D.Amount today equivalent to a specified future amount.E.Accumulation of an amount with interest.
Since we usually assume positive interest rates in time value analyses, the present value of a sum of money (for example, $500) will always be greater than the future value of the same sum as long as the time period (that is, n) is greater than zero. True False
The future value of a present sum increases as either the discount rate or the number of periods per year increases, other things held constant. True False
__________ is the interest rate that makes NPV equal to zero when it is used as the discount rate.
dont use chatgpt answer The present value of a future amount: a. will always be less than the future amount b. can be calculated precisely if the discount rate and number of periods is known c. is worth less than the future value d. both a. and b. above are true
For some interest rate i and some number of interest periods n, the uniform series capital recovery factor is 0.1468 and the sinking fund factor is 0.0268. What is the interest rate? What is n?
What happens to a future value is you increased the rate, r? What happens to a present 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? O The present value (PV) of the amount invested O The inflation rate indicating the change in average prices O The duration of the investment (N) O The interest rate (I) that could be earned by invested funds This process requires knowledge of the values of three of All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 8%, or 16%. Identify the interest rate that corresponds with each line.
7. Future value of annuities There are two categories of cash flows: single cash flows, referred to as "lump sums," and annuities. Based on your understanding of annuities, answer the following questions. Which of the following statements about annuities are true? Check all that apply. O An annuity is a series of egual payments made at fixed intervals for a specified number of periods. O Ordinary annuities make fixed payments at the beginning of each period for a certain time period. O An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. O An annuity due earns more interest than an ordinary annuity of equal time. Which of the following is an example of an annuity? O An investment in a certificate of deposit (CD) A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time Luana loves shopping for clothes, but considering the state of the economy, she has decided…

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