Fin640-c5

If you invest $100 at 10 percent compounded annually, how much money will you have at the end of 3 years?

$133.1 100x(1.1^3)

Suppose the present value is $100, the future value is 1,000 and n is 10 years. Which formula below is used to find the interest rate?

(r = (1000/100)^(1/10) -1

Which of the following are correct spreadsheet functions?

=PV(rate,nper,pmt,fv) =RATE(nper,pmt,pv,fv) =FV(rate,nper,pmt,pv)

The difference between ____ interest and compounded interest is that the amount of compound interest earned gets (bigger or smaller)

Simple; Bigger

future value is the ____ value of an investment at some time in the future.

cash

why is a dollar received today worth more than a dollar received in the future

todays dollar can be reinvested, yielding a greater amount in the future

Which of the following investments would results in a higher future value? Investment A - 12$ APR for 10 Years Investment B - 12% APR for 12 Years

investment b

T/F : Given the same rate of interest, more money can be earned with compounded interest than with the simple interest.

true

T/F Discounting is the opposite of compounding.

true

T/F: The formula for a present value factor is (1 / (1+r)^t)

true

If you invest for a single period at an interest rate of r, your money will grow to ___ per dollar invested

( 1 + r)

which of the following methods can be used to calculate present value?

1) a time value of money table 2) algebraic formula 3) financial calculator

Assuming the interest rate offered for a 10 year investment plan is the same as for a 4

10 year investment The longer time period you have before you'll need the money, the less you'll need to deposit today at the same interest rate.

What is the future value of $100 at 10 percent simple interest for 2 years.

120

if $100 earns compounded interest for 2 years at 10 percenter per year, the future value will be ______.

121

how long will it take $40 to grow to $240 at an interest rate of 6.53% compounded annually?

28.33 years

If you plan to put a $10,000 down payment on a house in five years and you can earn 6% per year, how much will you need to deposit today?

7472.58

Suppose we invest $100 now and get back $236,74 in 10 years. What rate of interest will we achieve?

9%

Which of the following can be determined using the future value approach to compound growth developed in this chapter?

Dividend Growth Sales Growth

T/F Small changes in the interest rate affect the future value of a small-term investment more than they would affect the value of a long-term investment.

False

T/F When using the time value of money features of a financial calculator, you should key in the interest rate as a decimal.

False

The idea behind ______ is that interest is earned on interest

compounding

T/F The Correct mathematical formula for finding the future value of $69 present value in 12 years at 9 percent annual interest is: FV = $69(1.12^9)

false

The basic present value equation underlies many of the:

most important ideas in corporate finance

The following equation results in the _____ value interest factor for a single deposit: 1 / (1+r)^2

present

if you want to know how much you need to invest today at 12% compounded annually in order to have $4000 in 5 yrs, you will need to find a(n) ___ value

present

T/F The correct future value interest factor in a time value of money table for $1 in 10 years at 10 percent per year is 2.5937.

True