Unit 6: Lesson 1: LS Assignment 1

True or False: Future value refers to the amount of money an investment is worth today.

False Future Value refers to the amount of money an investment will grow to over some period of time at some given interest rate

True or False: When entering the interest in a financial calculator, you should key in the interest rate as a decimal.

False The calculator is already programmed to interpret 10 as 10%

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

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

cash

The amount an investment is worth after one or more periods is called the ____ value.

future

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

(1+r)

If you invest 500$ for one year at a rate of 8% per year, how much interest will you earn?

$40

You invest $500 at 10 percent interest per annum. At the end of 2 years with simple interest you will have ____ and with compound interest you will have ____.

$600;$605

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

-Inflation will make a dollar in the future less than a dollar today -Today's dollar can be reinvested, yielding a greater amount in the future

Which of the following are the primary ways used to preform financial calculations today?

-financial calculator -spreadsheet functions

Which of the following is an incorrect keystroke in a financial calculator for calculating the future value of $100 today for 2 years at 10% per year?

0.10 I/Y The interest rate in a FINANCIAL calculator is entered as a whole number, not a decimal.

Using a time value of money take, what is the future interest factor for 10 percent for 2 years?

1.21

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

133.10

The correct future value interest factor in a time value of money table for finding the future value of $100 in 10 years at 10% per year interest is _____.

2.5937

Which of the following is the correct mathematical formula for calculation of the future value of $100 invested today for 3 years at 10% per year?

FV= $100 x (1.10)^3

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

FV= PV*(1+r)^(t)

The idea behind _____ is that interest is earned on interest

compounding

The process of accumulating interest in a n investment over time to earn more interest is called ________.

compounding

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

longer, greater

The concept of the time value of money is based on the principle that a dollar today is worth _______ a dollar promised at some tine in the future.

more than