Finance 3000 Chapter 5 Ohio University (online)
What is the future value of $100 compounded for 50 years at 10% annual interest
$11,739.09 =$100X1.10^50
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?
$7,472.58
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? (3 answers)
1) a time value of money table 2) algebraic formula 3) financial calculator
The idea behind ___ is that interest is earned on interest
compounding
True or False: small changes in the interest rate do not really matter when dealing w/ millions/ billions of dollars over 30/40 yrs
false
True or false: when using the time value of money features of a financial calculator, you should key in the interest rate as a decimal.
false
true or false: the correct future value interest factor in a time value of money table for $1 in 10 years at 10% per year is 2.5937
false
The concept of the time valuie of money is based on the principal that a dollar today is worth ____ a dollar promised at some time in the future
more than
The basic present value equation underlies many of the:
most important ideas in corporate finance
If you want to know how much you need to invest today at 12% compounded annually in order to have $4000 in five years, you will need to find a(n) ________ value.
present
True or False: Discounting is the opposite of compounding
true
True or false: given the same rate of interest, more money can be earned with compound interest than with simple interest
true
assuming the interest rate offered for a 10 year investment plan is the same as for a 4 year investment plan. Which of these two plans would require smaller savings amount to be deposited today.
10 year investment
How long will it take $40 to grow to $240 at an interest rate of 6.53% compounded anually
28.33 years pv: -40 fv: 240 i/y: 6.53 cmpt N
Suppose we invest $100 now and get back $236.74 in 10 years. What rate of interest will we achieve
9.0%
Future value is the __ value of an investment at some time in the future
Cash
Which of the following are correct spreadsheet functions
Discount Rate = RATE(nper,pmt,pv,fv) Present Value = PV(rate,nper,pmt,fv) Future Value = FV(rate,nper,pmt,pv)
Which of the following can be determined using the future value approach to compound growth developed in this chapter?
Dividend growth Population growth Sales growth
What is the Future Value of $100 at 10% simple interest for 2 years
FV=$100+2(0.10 X $100) = $120
