test

Suppose you deposit $100 in your saving accounts paying you 10% interest today, What is total interest you earned for 6 years?

$77.16

Suppose you deposit $100 in your saving accounts paying you 10% interest today, what is total compounding interest you earned for 6 years?

$17.16

10. Present value with multiple cash flows Suppose we had an investment that was going to pay $100 at the end of every year for the next 2 years and the discount rate is 5%. How much the most should we pay for this investment today or how much is this investment worth today? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$175.94

Suppose you deposit $100 in your saving accounts paying you 10% interest today, how much will you receive after 6 years.

$177.16

Item 15 Aidan deposited $8,500 in an account today. If the account earns 8.5 percent per year, compounded annually, how many years will it take for the account to reach a balance of $138,720?

34.23 years

Suppose you deposit $100 in your saving accounts paying you 10% interest today, what is total simple interest you earned for 6 years?

60

What is the time value of money?

A dollar in hand today is worth more than a dollar promised at some time in the future.

The value today of 1$ received in the future is called_? how much will be 1$ worth in the futrue is called_?

Future value factor and present value factor

2. Future value with multiple cash flows Suppose you deposit $100 today in an account paying 7 percent interest. In one year, you will deposit another $100. How much is the first $100 deposited today worth in two years. (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$110.49

3. Future value with multiple cash flows Suppose you deposit $100 today in an account paying 7 percent interest. In one year, you will deposit another $100. How much is the second $100 deposited at the end of the first year worth at the end of the second year. (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$111.49

5. Future value with multiple cash flows Suppose you deposit $100 today in an account paying 7 percent interest. In one year, you will deposit another $100. At the end of the first year, how much do you have in your account? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$117.00

4. Future value with multiple cash flows Suppose you deposit $100 today in an account paying 7 percent interest. In one year, you will deposit another $100. How much will you have in two years? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$211.49

6. Future value with multiple cash flows Suppose you deposit $100 today in an account paying 7 percent interest. In one year, you will deposit another $100. At the end of the second year, how much do you have in your account? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$251.49

Item 8 8. Present value with multiple cash flows Suppose we had an investment that was going to pay $100 at the end of every year for the next 2 years and the discount rate is 5%. How much the most should we pay for this investment today or how much is this investment worth today? First, lets answer how much is the first $100 paid at the end of first year worth today? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$90.24

9. Present value with multiple cash flows Suppose we had an investment that was going to pay $100 at the end of every year for the next 2 years and the discount rate is 5%. How much is the second $100 paid at the end of second year worth today? (Drawing the timeline of cash flows is helpful. And you might use PV factor, financial calculator or excel, but I recommend you use fianncial calculator or excel)

$97.70

In 1903, the winner of a competition was paid $50. In 2020, the winner's prize was $235,000. What will the winner's prize be in 2040 if the prize continues increasing at the same rate? (Do not round intermediate calculations. Round your answer to the nearest $500.)

$998,500

Which of the following ways is used to calculate future values for multiple cash flows?

Calculate the FV of each cash flow first and then add them up

7. Which of the following ways is used to calculate present values for multiple cash flows?

Calculate the present values individually and add them up

One of the basic problems faced by the financial manager is how to determine the value today of cash flows expected in the future. The value of today of cash flows expected in the future is called_? The value of cash flows expected in the future is called_?

Present value and future value

Assume you deposited $6,000 into a retirement savings account today. The account will earn 8 percent interest per year, compounded annually. You will not withdraw any principal or interest until you retire in 48 years. Which one of the following statements is correct?

The total amount of interest you will earn will equal $6,000 × .08 × 48.

The interest earned on both the initial principal and the interest reinvested from prior periods is called:

compound interest.

Hayley won a lottery and will receive $1,000 each year for the next 30 years. The current value of these winnings is called the:

present value.