Exam 3: Time Value of Money: an Introduction

Refer to the table above. An international seafood supplier is offered 9.52 million yen today for 1000 pounds of abalone frozen in the shell. One thousand pounds of abalone can be sourced from various countries at the prices shown above. The current market exchange rates between the United States and the other relevant currencies are also shown. In addition, $1 U.S. = 102 yen. What is the value, in U.S. dollars, of the best deal the international seafood supplier can make?

How can we perform a cost-benefit analysis in case they are occurring in different currencies?

Consider the following timeline: If the current market rate of interest is 13%, then the value of the cash flows in year 0 and year 2 as of year 1 is closest to ________.

You see on Craigslist that a used XBOX 360 sells for $100 and a new XBOX 360 sells for $300. Is this an arbitrage opportunity?

What is the present value (PV)of $50,000 received twenty years from now, assuming the interest rate is 6% per year?

Why is it usually necessary to use the time value of money when performing a cost-benefit analysis?

Samantha enters a rent-to-own agreement for living room furniture. She will pay $60 per month for one year. Which of the following shows the timeline for her payments if the first payment is one month from now?

If $17,000 is invested at 10% per year, in approximately how many years will the investment double?

A coin collector treasures his 1969-S doubled die obverse Lincoln cent because he found it in his pocket change, rather than purchasing it. He can sell it on the open market for $35,000, but would only sell it for at least twice that price, due to its sentimental value to him. It is anticipated that the coin will increase in market value in the foreseeable future. What is the value of the coin?

Which of the following statements is FALSE about valuing cash at different points in time?

If the rate of interest (r)is 9%, then you should be indifferent about receiving $750 in one year or ________.

Why should you approach every problem by drawing a timeline?

Use the information for the question(s)below. As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS)crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI)crude. Assuming you just purchased 9,950 bbl of WTI crude at the current market price, the total revenue (cost)to you if you were to refine this crude oil and sell the unleaded gasoline is closest to ________.

Jeff has the opportunity to receive lump-sum payments either now or in the future. Which of the following opportunities is the best, given that the interest rate is 4% per year?

A lender lends $10,100, which is to be repaid in annual payments of $2070 for 6 years. Which of the following shows the timeline of the loan from the lender's perspective?

Advanced Micro Devices (NYSE: AMD)is currently trading at $20.75 on the NYSE. Advanced Micro Devices is also listed on NASDAQ. Assume it is currently trading on NASDAQ at $20.50. Does an arbitrage opportunity exist and, if so, how would you exploit it and how much would you make on a block trade of 1000 shares?

In order to distinguish between inflows and outflows, different colors are assigned to each of these cash flows when constructing a timeline.

Why is the personal decision a financial manager makes as to whether to buy or to rent an apartment as a personal residence most like the professional decision that manager makes as to whether her firm should try to acquire a stake in a fast growing new Internet-based company?

Whose cash flow is best described by the timeline shown below?

The Law of One Price states that if equivalent goods or securities are traded simultaneously in different competitive markets, they will trade for the same price in each market.