Question 1

Explain the concept of the future value of a single amount.

Accepted Answer

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Question 2

A company needs to have $200,000 in four years,and will create a fund to ensure that the $200,000 will be available.If they can earn a 7% return,how much must the company invest in the fund today to equal the $200,000 at the end of four years?

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Question 3

Madera Iron Sculpting is planning to save the money needed to replace one of its robotic welders in five years by making a one-time deposit of $20,000 today and four yearly contributions of $5,000 beginning at the end of year 1.The deposits will earn 10% interest.How much money will Madera have accumulated at the end of five years to replace the welder?

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Question 4

Troy has $105,000 now.He has a loan of $175,000 that he must pay at the end of five years.He can invest his $105,000 at 10% interest compounded semiannually.Will Troy have enough to pay his loan at the end of the five years?

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Question 5

Explain the concept of the present value of a single amount.

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Question 6

Explain the concept of the future value of an annuity.

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Question 7

Annette has a loan that requires a $25,000 payment at the end of three years.The interest rate on the loan is 5%,compounded annually.How much did Annette borrow today?

Accepted Answer

Present Value = Future Value * Interest Factor
Present Value = $25,000 * 0.8638 = $21,595
0.8638 is the interest factor on the Present Value table; n = 3; i = 5%

Question 8

An individual is planning to set-up an education fund for her children.She plans to invest $10,000 annually at the end of each year.She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%.What will be the total value of the fund at the end of 10 years?

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Question 9

Thompson Company has acquired a machine from a dealer which requires a payment of $45,000 at the end of five years.This transaction includes interest at 8%,compounded semiannually.What is the value of the machine today?

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Question 10

How long will it take an investment of $25,000 at 6% compounded annually to accumulate to a total of $35,462.50?

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Question 11

A company is creating a fund by depositing $65,763 today.The fund will grow to $90,000 after eight years.What annual interest rate is the company earning on the fund?

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Question 12

A company is considering an investment that will return $20,000 at the end of each semiannual period for four years.If the company requires an annual return of 10%,what is the maximum amount it is willing to pay for this investment?

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Question 13

What interest rate is required to accumulate $6,802.50 in four years from an investment of $5,000?

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Question 14

Explain the concept of the present value of an annuity.

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Question 15

What amount can you borrow if you make six quarterly payments of $4,000 at a 12 % annual rate of interest?

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Question 16

Chad is setting up a retirement fund,and he plans on depositing $5,000 per year in an investment that will pay 7% annual interest.How long will it take him to reach his retirement goal of $69,080?

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Question 17

What is interest?

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Question 18

A company borrows money from the bank by promising to make six annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?

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Question 19

Crowe Company has acquired a building with a loan that requires payments of $20,000 every six months for five years.The annual interest rate on the loan is 12%.What is the present value of the building?

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Question 20

A company is setting aside $21,354 today and wishes to have $30,000 at the end of three years for a down payment on a piece of property.What interest rate must the company earn?

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Quiz 14: Applying Present and Future Values