Financial Management 3

The present value of $115,000 expected to be received one year from today at an interest rate (discount rate) of 10% per year is:

• $121,000

• $100,500

• $110,000

• $104,545

A two-year discount factor at a discount rate of 10% per year is:

(a)  

If you invest $100,000 today at 12% interest rate for one year, what is the amount you will have at the end of the year?

• $90,909

• $112,000

• $100,000

• None of the above

If the present value of the cash flow X is $200, and the present value cash flow Y is $150, then the present value of the combined cash flow is:

• $200

• $150

• $350

• $50

What is the present value annuity due factor of $1 at a discount rate of 15% for 15 years?

• $5.8474

• $6.7245

• 7.1324

• 8.5143

A bank offers the following investments. Which do you prefer?

• A stated rate of 10% continuously compounded

• stated rate of 10% compounded annually

• A stated rate of 10% compounded semi-annually

• A rate of 10% simple interest

You invest $800 in an account that pays 6% interest, compounded annually.  How much money do you have after five years?  Round your answers to the nearest cent. 

• $898.09
• $1070.58
• $1710.58
• $975.68

The "time value of money" means that

• money paid out today less value than if the money is paid out in the future

• money received today is worth more than the same amount of money received in the future

• the more time a person has to save, the lower the return on the money

• the longer money is held, the less likely it will be spent