Finance 320 Chapter 4
If the future value factor for $1 invested for 5 years at 10% is ___, then the corresponding present value factor for $1 received in 5 years with a 10% discount rate is ___.
1.611; 0.6209
The future value of a $100 investment in 4 years compounded at 8% per year equals ___.
136.05
How long will take for $40 to grow to $240 at an interest rate of 6.53% compounded annually?
28.33 years
The idea behind ____ is that interest is earned on interest.
Compounding
Calculating the present value of a future cash flow to determine its worth today is commonly called ____ valuation.
Discount Cash Flow (DCF)
If you invest $100 for 5 years at 10% interest compounded annually, which of the following will be the formula for the future value of your investment?
FV=100(1+0.10)^5
Which of the following are the primary ways used to perform financial calculations today?
Financial Calculator Spreadsheet Functions
For a given time period (t) and interest rate (r), the present value factor is ____ the future value factor. the reciprocal of 1 plus 1 divided by 1 minus
the reciprocal of 1 divided by
If you wish to find the future value of $100 invested at 10% for 5 years, which of the following would be the correct Excel function?
=FV(0.10,5,0,-100)
To calculate the future value of $100 invested for t years at r interest rate, you enter the present value in your calculator as a negative number. Why?
Because the $100 is an OUTFLOW from you which should be negative.
Which one of the following can be determined using the future value approach to compound growth development in this chapter? Population Growth Erratic Growth Dividend Growth Sales Growth
Population Growth Dividend Growth Sales Growth
Time value of money tables are not as common as they once were because: -They are available for only a relatively small number of interest rates -It is easier to use inexpensive financial calculators instead -They are more accurate than formula or calculator solutions -They are easily memorized
They are available for only a relatively small number of interest rates It is easier to use inexpensive financial calculators instead
The amount an investment is worth after one or more periods is called the ____ value.
Future
Why is a dollar received today worth more than a dollar received in the future?
Inflation will make a dollar in the future worth less than a dollar today. Today's dollar can be reinvested, yielding a greater amount in the future.
A dollar received one year from today has ___ value than a dollar received today.
Less