Question 1

Use the tables to determine the answers to the following:
(1) How much must be invested now for 5 periods at 6% to amount to $15,000?
(2) How much is $3,000 invested now at 8% in 8 periods worth?
(3) How much is $25,000 compounded quarterly at 12% for 4 years?

Accepted Answer

The answer of Use the tables to determine the answers...

Question 2

Explain what is meant by the "time value of money." Provide examples.

Accepted Answer

The answer of Explain what is meant by the "time...

Question 3

Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?

Accepted Answer

The answer of Powers Company wishes to issue $2,000,000 of...

Question 4

(a) How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b) How long will it take if she invests the same amount at 4% semi-annually?

Accepted Answer

The answer of (a) How long will it take Barbara...

Question 5

Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?
A) $1,000.
B) $1,105.13.
C) $1,077.50.
D) $1,082.37.

Accepted Answer

To calculate the future value of Belle's investment, we can use the formula:

FV = Pmt x [(1 + r)^n - 1] / r

where FV is the future value, Pmt is the payment made each year, r is the annual interest rate, and n is the number of years.

Plugging in the values, we get:

FV = 200 x [(1 + 0.05)^5 - 1] / 0.05
FV = 200 x [1.27628] / 0.05
FV = $5,105.13

Therefore, Belle will have $1,105.13 at the end of 5 years.

The correct answer is B.

Question 6

A future amount is the dollar amount to which a present value will ______________ over time.
A) vanish.
B) accumulate.
C) disappear.
D) remain.

Accepted Answer

A future amount indicates the value that a present amount will accumulate to over time, so the correct choice is "accumulate." Vanishing, disappearing, or remaining do not accurately reflect what happens to a present value over time.

Question 7

Joan is 75 years old and wishes to retire. She needs to have $48,000 a year plus her social security to live in the style she is accustomed to. She would like to have enough money in her retirement account which earns 5% compounded annually to support her for the next 15 years. How much must be in the fund if she takes the first payment at year-end?

Accepted Answer

The answer of Joan is 75 years old and wishes...

Question 8

Explain how compound interest applies to the time value of money.

Accepted Answer

The answer of Explain how compound interest applies to the...

Question 9

Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?

Accepted Answer

The answer of Sam Rivers has $3,000 to invest. He...

Quiz 27: The Time Value of Money: Future Amounts and Present Values Answer Key

Use the tables to determine the answers to the following: (1) How much must be invested now for 5 periods at 6% to amount to $15,000? (2) How much is $3,000 invested now at 8% in 8 periods worth? (3) How much is $25,000 compounded quarterly at 12% for 4 years?

Explain what is meant by the "time value of money." Provide examples.

Powers Company wishes to issue $2,000,000 of 8%, 10 year bonds which pay interest semi-annually. The current discount rate is 6%. What amount should the bonds sell for?

(a) How long will it take Barbara to accumulate $30,000 to buy a car if she invests $15,000 at 5%? (b) How long will it take if she invests the same amount at 4% semi-annually?

Belle invests $200 at the end of each year in a savings account which pays 5% annually. How much will Belle have at the end of 5 years?

A future amount is the dollar amount to which a present value will ______________ over time.

Explain how compound interest applies to the time value of money.

Sam Rivers has $3,000 to invest. He must decide whether to invest this money for five years at 10% compounded semi-annually or at 12% compounded annually. Which option should he select?