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WorksheetsTime Value of Money
Total questions: 62
Worksheet time: 5hrs 10mins
The formula for compound value is :
FVn = PV (1+i)
FVn = PV/(1+i)
FVn = PV (1+i)n
FVn = (1+i)/PV
What is the future value of $1000 compounded annually at 8% for five years ?
$1,080
$1,400
$1,469
$1,800
Computing the future value of an amount of money for any specified time period requires knowledge of the amount of principal and the interest rate
True
False
Present value interest factor (PVIF) are usually less than 1.0
True
False
What is the present value of a ten year $1000 ordinary annuity discounted at 6% ?
$4886
$6145
$7360
$10000
Parents want to save $100,000 for their child's education. They plan to make fifteen equal year end payments and expect to earn an 8% annual interest rate. How much will they have to invest annually to accumulate the $100,000 ?
$2,542
$3,683
$6,139
$7,285
The formula for compound value is :
FVn = PV (1+i)
FVn = PV/(1+i)
FVn = PV (1+i)n
FVn = (1+i)/PV
What is the future value of $1000 compounded annually at 8% for five years ?
$1,080
$1,400
$1,469
$1,800
Computing the future value of an amount of money for any specified time period requires knowledge of the amount of principal and the interest rate
True
False
What is the present value of a ten year $1000 ordinary annuity discounted at 6% ?
$4886
$6145
$7360
$10000
Parents want to save $100,000 for their child's education. They plan to make fifteen equal year end payments and expect to earn an 8% annual interest rate. How much will they have to invest annually to accumulate the $100,000 ?
$2,542
$3,683
$6,139
$7,285
If you borrowed $120,000 to buy a hous and financed it at 10% annual interest for thirty years, what is your annual mortgage payment assuming that you make equal year end payment?
$4000
$3500
$5336
$12729
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
The amount of money a person expects to have in the future is called
Principal
Interest
Present value
Future value
Process of changing future value to the present value known as
Compound
Discount
Simple interest
Principal
Process of changing present value to the future value known as
Principal
Discount
Simple interest
Compound
Earning interest on interest is called
Extra interest
Inflation interest
Simple interest
Compound interest
Lisa wants to know what the value of her RM1,000 will be if she invests it for 3 years at a given rate. What is Lisa trying to find?
Present value
Future value
Effective annual rate (EAR)
Discount rate
Cash received today is preferred to cash received in the future
True
False
Today, you deposit RM500 into Bank A saving account that pays 8% interest per year. How much will you have in five years?
RM738.73
RM734.66
RM834.66
RM850.66
What is the present value of RM10,000 to be received in year 10 at an interest rate of 10%?
RM4,855.43
RM5, 855.43
RM3,855.43
RM6, 855.43
You invest RM700 in an acoount that pays 8% interest, compounded annually. How much money do you have after six years? Round your answer to the nearest cent.
RM1,110.81
RM1, 111.81
RM1, 112.81
RM1,101.81
The future or present value of an amount depends upon:
the interest rate.
the number of periods.
number of times per year compounding occurs.
all of the above.
In which case will an investor receive the most interest:
10%, compounded annually.
10%, compounded monthly.
10%, compounded continuously.
10%, compounded daily.
Annuities:
are a stream of equal payments at unequal time intervals.
are a stream of equal payments at equal time intervals.
are a stream of equal payments that continue forever.
none of the above.
The basic rule of the time value of money is:
investments will always be worth more tomorrow than they are today
it’s always wiser to save a dollar for tomorrow than to spend it today
a dollar in hand today is worth more than a dollar promised at some time in the future
all of the above express an aspect of the basic rule of time value of money
When comparing an annuity due with an ordinary annuity with the same payment and duration, the annuity due will always have a _______ present value and will always have a _______ future value.
higher; higher
higher; lower
lower, higher
lower, lower
A perpetuity:
has infinite value because the payments continue forever
can be valued (PV) if the payment amount and interest rate are known
don’t exist in the financial world
none of the above are true
The present value of a future amount will be higher with a higher interest rate.
True
False
Lenders prefer less frequent compounding; borrowers prefer more frequent compounding.
True
False
A perpetuity may be thought of as an annuity that continues forever.
True
False
The future value of a perpetuity makes no sense because the payments never end.
True
False
Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th birthday. How much does Rita need to put in the bank now if the interest rate on her account is 12% per year?
$5,248.19
$6,502.12
$11,685.87
$6,079.58
What is the definition of present value?
the future value of a current sum of money
the interest paid on a current sum of money
the current value of a future sum of money
the interest paid on a future sum of money
Randy saves money using an account which earns interest over the course of several years. Which statement is true?
The value of money in his account increases over time.
The present value of money in his account is greater than the future value.
The value of money in his account remains constant over time.
The future value of his account is equal to the present value.
Why does the value of money in a savings account increase over time?
because it earns interest
because it is not spent
because future value is always equal to present value
because future value is always less than present value
Nikita invests $2,000 into a bank account with a 4% annual interest rate. In seven years, which is the most expensive item she could afford to buy?
a beach vacation priced at $2,200
a sectional sofa priced at $2,700
a mountain bike priced at $2,500
a home theater system priced at $3,000
You want to deposit $12,000 in a bank at an interest rate of 8 percent per year. What is the future value of this money after five years?
$15,315.38
$17,631.94
$16,830.62
Todd currently has $5,000. What was the value of his money four years ago if he's earned 4 percent interest each year?
$4,274.02
$4,113.51
$4,109.64
Kate wants to have $25,000 in 16 years. How much does she need to invest if the interest rate is 6 percent per year?
$10,431.63
$9,841.16
$7,353.88
What would be the value of $100 after 10 years if you earn 11 percent interest per year?
$259.37
$283.94
$110.46
If you save $3,000 at an interest rate of 14 percent per year, how much will you have at the end of six years? The interest should be compounded.
$5,805.96
$6,502.34
$6,584.91
Rita promises her daughter on her 12th birthday that she will give her $12,000 for college on her 18th birthday. How much does Rita need to put in the bank now if the interest rate on her account is 12% per year?
$5,248.19
$6,502.12
$11,685.87
$6,079.58
What is the definition of present value?
the future value of a current sum of money
the interest paid on a current sum of money
the current value of a future sum of money
the interest paid on a future sum of money
Randy saves money using an account which earns interest over the course of several years. Which statement is true?
The value of money in his account increases over time.
The present value of money in his account is greater than the future value.
The value of money in his account remains constant over time.
The future value of his account is equal to the present value.
Why does the value of money in a savings account increase over time?
because it earns interest
because it is not spent
because future value is always equal to present value
because future value is always less than present value
Nikita invests $2,000 into a bank account with a 4% annual interest rate. In seven years, which is the most expensive item she could afford to buy?
a beach vacation priced at $2,200
a sectional sofa priced at $2,700
a mountain bike priced at $2,500
a home theater system priced at $3,000
You want to deposit $12,000 in a bank at an interest rate of 8 percent per year. What is the future value of this money after five years?
$15,315.38
$17,631.94
$16,830.62
Todd currently has $5,000. What was the value of his money four years ago if he's earned 4 percent interest each year?
$4,274.02
$4,113.51
$4,109.64
Kate wants to have $25,000 in 16 years. How much does she need to invest if the interest rate is 6 percent per year?
$10,431.63
$9,841.16
$7,353.88
What would be the value of $100 after 10 years if you earn 11 percent interest per year?
$259.37
$283.94
$110.46
If you save $3,000 at an interest rate of 14 percent per year, how much will you have at the end of six years? The interest should be compounded.
$5,805.96
$6,502.34
$6,584.91
