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Exam 26: Time Value of Money B

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Question 31

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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?

A) $ 46,320
B) $ 67,107
C) $100,000
D) $144,870
E) $215,890

F) A) and D)
G) A) and E)

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Question 32

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An annuity is a series of equal payments.

A) True
B) False

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Question 33

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The present value of $5,000 per year for three years at 12% compounded annually is $12,009.

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

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?

Thompson Company has acquired a machine from a dealer that 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?

A company borrows money from the bank by promising to make 6 annual year-end payments of $25,000 each.How much is the company able to borrow if the interest rate is 9%?

When you reach retirement age,you will have one fund of $100,000 from which you are going to make annual withdrawals of $14,702.The fund will earn 6% per year.For how many years will you be able to draw an even amount of $14,702?

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?

The interest rate is also called the __________________ rate.

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

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.

At an annual interest rate of 8% compounded annually,$5,300 will accumulate to a total of $7,210.65 in 5 years.

A company borrows money from the bank by promising to make 8 semiannual payments of $9,000 each.How much is the company able to borrow if the interest rate is 10% compounded semiannually?

To calculate present value of an amount,two factors are required: __________________ and ___________________.

From the perspective of a depositor,a savings account is a liability with interest.

Future value can be found if the interest rate (i),the number of periods (n),and the present value (p)are known.

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

A company is creating a fund today by depositing $65,763.The fund will grow to $90,000 after 8 years.What annual interest rate is the company earning on the fund?

Keisha has $3,500 now and plans on investing it in a fund that will pay her 12% interest compounded quarterly.How much will Keisha have accumulated after 2 years?