chap 4

Given an investment amount and a set rate of interest, the _____ the time horizon the _____ the future value.

longer; greater

Which formula below represents a present value factor?

1/(1+r)t

Which of the following is the multi-period formula for compounding a present value into a future value?

FV=PV x (1 +r) ^T.

True or false: Given the PV, FV, and payment amount, you can determine the number of periods.

Given the PV, FV, and discount rate, you can determine the number of periods.

The formula for a present value factor is 1(1+r)t. true or false hoe

Reason: This is the present value interest factor, not the present value itself. In order to get PV, you need to multiply FV by this factor. Notice how as the denominator becomes larger due to higher interest or longer periods, it reduces the factor.

Using the PV, discount rate, and fvBlank 1Blank 1 fv , Correct Unavailable, you can determine the number of periods. (Enter abbreviation only.)

furture

The current value of a future cash flow discounted at the appropriate rate is called the _____ value.

present

FV = ×(1 + r)t

pv