FIN 300 chapter 5 uky
True or False: Given the same rate of interest, more money can be earned with compound interest than with simple interest.
True
present
If you want to know how much you need to invest today at 12 percent compounded annually in order to have $4,000 in five years, you will need to find a(n) _______ value.
simple interest
Interest earned on the original principal amount invested is called _____.
less
All else equal, the longer time period you have before you will need the money, the_________ (less/more) you will need to deposit today to have the same amount in the future.
_______value is the cash value of an investment at some time in the ________.
future;future
The difference between _______ interest and compound interest is that the amount of compound interest earned gets (bigger or smaller) ___________ every year.
Simple; bigger
r = (1000/100)^(1/10)-1
Suppose present value is $100, future value is $1,000, and N is 10 years. Which formula below is used to find the (decimal) interest rate?
=NPER(0.06,0,−6000,10000)
Suppose you want to save $10,000 to buy a car. You have $6,000 to deposit today and you can earn 6% on your investments. You want to know when you'll have enough to buy the car. Which of the following spreadsheet functions will solve the problem?
greater
The ______ (smaller/greater) the interest rate changes, the greater the impact to the future value of an amount invested.
present
The ______value is the current value of future cash flows discounted at the appropriate discount rate.
PV = FVt/(1+r)t
The basic present value equation is:
most important ideas in corporate finance
The basic present value equation underlies many of the _____.
sales growth dividend growth
Which of the following can be determined using the future value approach to compound growth developed in this chapter?
a time value of money table, an algebraic formula and a financial calculator
Which of the following methods can be used to calculate present value?
less
a dollar received from today has______value than a dollar received today
Cash
Future value is the ________ value of an investment at some time in the future.
False
True or false: 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.
discounted cash flow valuation
Calculating the present value of a future cash flow to determine its value today is called _____.
compounding
Discounting is the opposite of______.
=NPER(0.0653,0,−40,240)
Which formula will you enter into a spreadsheet cell to determine how long it will take $40 to grow to $240 at an interest rate of 6.53% compounded annually?
Discount rate = RATE(nper,pmt,pv,fv) Future value = FV(rate,nper,pmt,pv) Present value = PV(rate,nper,pmt,fv)
Which of the following are correct spreadsheet functions?
Cash
Future value is the________ value of an investment at some time in the future.
10-year investment
Assuming the interest rate offered for a 10-year investment plan is same as for a 4-year investment plan. For an investor to achieve the same future value, which of these two plans would require a smaller savings amount to be deposited today?
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
present value factor
If you want to know how much you need to invest today at 12 percent compounded annually in order to have $4,000 in five years, you will need to find a(n) _______ value.
simple interest
Interest earned on the original principal amount invested is called______
simple
Interest earned only on the original principal amount invested is called_______ interest.
$133.10 FV= $100 *1.10^3
Invest $100 a 10% compounded annually, how much will you have at the end of the 3 Years ?
return
The discount rate is also called the rate of
Compounding
The process of leaving your money and any accumulate interest in an investment for more than one period, thereby reinvesting interest is called________.
present
The value is the current value of future cash flows discounted at the appropriate discount rate.
discount
The________rate is the rate used to calculate the present value of the future cash flows.
false Its FV=PV*(1+r)^t
True or false: The multi-period formula for future value using compounding is FV = (1 + r)^t.
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.
$1593.85 explanation for calculator input: 1000 for PV, 8 for n and 6 for I/Y.
What is the future value of $1,000 invested for 8 years at 6%?
the same
When the future value formula is used to calculate growth rates, the assumption is that _____ growth rate is achieved each year.
1/(1+r)^t
Which formula below represents a present value factor? Multiple choice question. (1 + r)/t
