Exam 25: Time Value of Money

Sandra has a savings account that has accumulated to $50,000.She started with $28,225,and earned interest at 10% compounded annually.It took her five years to accumulate the $50,000.(PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

A company is beginning a savings plan.It will be saving $15,000 per year for the next 10 years.How much will the company have accumulated after the tenth year-end deposit,assuming the fund earns 10% interest?

Which interest rate column would you use from a present value or future value table for 8% interest compounded quarterly?

A company has $50,000 today to invest in a fund that will earn 7%.How much will the fund contain at the end of 8 years?

Giuliani Co.lends $524,210 to Craig Corporation.The terms of the loan require that Craig make six semiannual period-end payments of $100,000 each.What semiannual interest rate is Craig paying on the loan?

Russell Company has acquired a building with a loan that requires payments of $20,000 every six months for 5 years.The annual interest rate on the loan is 12%.What is the present value of the building? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

An interest rate is also called a discount rate.

Paul wants to invest a sum of money today that will accumulate to $50,000 at the end of 4 years.Assuming he can earn an interest rate of 8% compounded semiannually,how much must he invest today? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

Interest is the borrower's payment to the owner of an asset,for its use.

The future value of an ________ annuity is the accumulated value of each annuity payment with interest as of the date of the final payment.

You are little late planning your retirement,but are looking forward to retiring in 10 years.You expect to save $6,000 a year at an annual rate of 8%.How much will you have accumulated when you retire?

Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.

A company borrows money from the bank by promising to make 6 annual year-end payments of $27,000 each.How much is the company able to borrow if the interest rate is 9%?

Patricia wants to invest a sum of money today that will yield $10,000 at the end of 6 years.Assuming she can earn an interest rate of 6% compounded annually,how much must she invest today? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

A company needs to have $150,000 in 5 years,and will create a fund to insure that the $150,000 will be available.If it can earn a 6% return compounded annually,how much must the company invest in the fund today to equal the $150,000 at the end of 5 years?

An annuity is a series of equal payments occurring at equal intervals.

In a present value or future value table,the length of one time period may be interpreted as one year,one month,or any other length of time.

Jessica received a gift of $7,500 at the time of her high school graduation.She invests it in an account that yields 10% compounded semiannually.What will the value of Jessica's investment be at the end of 5 years? (PV of $1,FV of $1,PVA of $1,and FVA of $1) $\bold{\text{(Use appropriate factor(s)from the tables provided.)}}$

The future value of an ordinary annuity is the accumulated value of each annuity payment excluding interest as of the date of the final payment.