time value of money part 2
If a $10,000 investment earns a 7% annual return, what should its value be after 6 years?
$15,010
If you deposit $500 into a Certificate of Deposit earning 3%, what would be your earnings after 1 year?
15
Randy Hill wants to retire in 20 years with $1,000,000. If he can earn 10% per year on his investments, how much does he need to deposit each year to reach his goal? Round your answer to the nearest dollar.
17,460
If you begin saving $2,000 a year at 5% (from age 22 to age 30 or 9 years), what will these funds grow to in this time period?
22,054
If you want $1,000 three years from now and you earn 4 percent on your savings, how much do you need to deposit now?
889
If inflation is expected to be 8 percent, how long will it take for prices to double?
9 years
The saving component of financial planning focuses on long-term security and includes:
A regular savings plan for emergencies
Which of the following best describes the concept of the time value of money?
Increases in an amount of money as a result of interest earned.
Robert Brown is interested in attending a concert next weekend. Unfortunately, he is scheduled to work. If he finds a substitute for his shift so he can attend the concert, what kind of cost is he incurring?
Personal opportunity cost relating to time
Many Americans have money problems because of
Poor planning and weak money management habits
An example of a personal opportunity cost would be
Time comparing several brands of personal computers.
To calculate the time value of money, we need to consider all of the following except the
Type of investment.
index funds
are passively managed
wh his less likely to be harmed by inflation
borrowers
the problem of bankruptcy is associated with overuse and misuse of credit in the --- component of financial planning
borrowing
future value computations are often referred to as
compounding
savages are generated whenever
current income exceeds current spending
the first step to financial planning process is
determine you current financial situautino
present value computation are also referred to as
discounting
________ goals relate to infrequently purchased, expensive tangible items.
durable-product
every decision involves uncertainty, which is referred to as
evaluating risk
which of the following is correct
food and clothing are consumable-product goals
Which of the following is an example of a financial opportunity cost?
forgoing wages to attend sc hool
An investor should expect to receive a risk premium for
higher uncertainty about getting his money bacl
The goal of investing $50 per month for the next 12 years for your nephew's college fund is a(n) ________ goal.
longterm
increased consumer saving and investing is likely to be accompanied by
lower interest rates
the present value of a future amount of money will be greater the
lower the interest rate
according to the concept of time value of money
money is more valuable to a person sooner it is recieved
I can invest a dollar today and earn interest on it, then it should be worth ________ in the future.
more
attempts to increase income though employment are part of the --- component of financial planning
obtaining
which of the following would increase the interest rate for a loan
poor credit rating
changed in personal, social and economic factors may require you to
review and revise your financial plan more frequently
making financial decisions related to income involves all fo the following except
taking
the future value of a sum of money refers to
the amount which some current sum of money will grow over time
the consumer price index measures
the average change in prices of a fixed basket of goods and services of urban consumers
interest is
the price paid for the use of money
the rule of 72
used to estimate how fast prices will double given annual inflation rates
opportunity cost refers to
what you give up my making a choice
