WorksheetsTIME VALUE OF MONEY
Total questions: 10
Worksheet time: 8mins
You want to buy an ordinary annuity that will pay you Rs 4,000 a year for the next 20 years. You expect annual interest rates will be 8 percent over that time period. The maximum price you would be willing to pay for the annuity is closest to
32,000
39,272
40,000
80,000
With continuous compounding at 10 percent for 30 years, the future value of an initial investment of Rs2,000 is closest to
34,898
40,171
164,500
328,282
In 3 years you are to receive Rs 5,000. If the interest rate were to suddenly increase, the present value of that future amount to you would
fall
rise
unchange
not able to calculate
Assume that the interest rate is greater than zero. Which of the following cash-inflow streams should you prefer?
Year1 =400
Year2 =300
Year3 =200
Year4 =100
Year1 =100
Year2 =200
Year3 =300
Year4 =400
Year1 =250
Year2 =250
Year3 =250
Year4 =250
Any of the above, since they each sum to $1,000.
To increase a given present value, the discount rate should be adjusted
upward
downward
True
Fred
For Rs 1,000 you can purchase a 5-year ordinary annuity that will pay you a yearly payment of RS 263.80 for 5 years. The compound annual interest rate implied by this arrangement is closest to
8%
9%
10%
11%
You are considering borrowing Rs 10,000 for 3 years at an annual interest rate of 6%. The loan agreement calls for 3 equal payments, to be paid at the end of each of the next 3 years. (Payments include both principal and interest.) The annual payment that will fully pay off (amortize) the loan is closest to
2674
2890
3741
4020
When n = 1, this interest factor equals one for any positive rate of interest.
PVIF
FVIF
PVIFA
FVIFA
(1 + i)n
PVIF
FVIF
PVIFA
FVIFA
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 .
RULE 415
RULE OF 72
RULE OF 78
RULE 44
