Question 1

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 must...

Question 2

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

Accepted Answer

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

Question 3

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 4

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 5

(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 to...

Question 6

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 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

(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 to...

Question 9

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 is the expected amount that an investment or present value will accumulate over time with a certain rate of interest. It indicates the value that the present amount will grow into in the future. Therefore, choice B, accumulate, is the correct answer.

Question 10

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.

Quiz 28: The Time Value of Money: Future Amounts and Present Values

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?

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

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.

(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?

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?

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

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?