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The present value of a single amount can be represented as
The present value of a single amount can be represented as
The basic future value equation is given by
The basic future value equation is given by
The process of finding present values is frequently called
The process of finding present values is frequently called
The values shown in ordinary annuity tables (either present value or compound value) can be adjusted to the annuity due form by the ordinary annuity interest factor by
The values shown in ordinary annuity tables (either present value or compound value) can be adjusted to the annuity due form by the ordinary annuity interest factor by
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Finding the compound sum of $1,000 to be received at the beginning of each of the next 5 years requires calculating the
Finding the compound sum of $1,000 to be received at the beginning of each of the next 5 years requires calculating the
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An annuity due is one in which _____.
An annuity due is one in which _____.
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You have just won a $5 million lottery to be received in twenty annual equal payments of $250,000. What will happen to the present value of your winnings if the interest rate increases during the next 20 years?
You have just won a $5 million lottery to be received in twenty annual equal payments of $250,000. What will happen to the present value of your winnings if the interest rate increases during the next 20 years?
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You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would improve the present value of your cash flows?
You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would improve the present value of your cash flows?
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If the present value of a given sum is equal to its future value, then _____.
If the present value of a given sum is equal to its future value, then _____.
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Using the "Rule of 72", about how long will it take a sum of money to double in value if the annual interest rate is 9 percent?
Using the "Rule of 72", about how long will it take a sum of money to double in value if the annual interest rate is 9 percent?
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The present value of an ordinary annuity is the
The present value of an ordinary annuity is the
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When a loan is amortized over a five year term, the _____.
When a loan is amortized over a five year term, the _____.
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Annuity due calculations are especially important when dealing with
Annuity due calculations are especially important when dealing with
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The more frequent the compounding, the _____.
The more frequent the compounding, the _____.
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The effective rate of interest will always be _____ the nominal rate.
The effective rate of interest will always be _____ the nominal rate.
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Which of the following is worth more?
Which of the following is worth more?
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The annual effective rate of interest (ieff) is a function of:
The annual effective rate of interest (ieff) is a function of:
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The ______ of a perpetual stream of equal, annual returns (PMT) discounted at i% per year is equal to _____.
The ______ of a perpetual stream of equal, annual returns (PMT) discounted at i% per year is equal to _____.
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Annuity due calculations are most common when dealing with:
Annuity due calculations are most common when dealing with:
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The difference between an ordinary annuity and an annuity due is:
The difference between an ordinary annuity and an annuity due is:
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Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.
Determine how much $1,000 deposited in a savings account paying 8% (compounded annually) will be worth after 5 years.
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The amount of simple interest is equal to the product of the principal times_____ times____ .
The amount of simple interest is equal to the product of the principal times_____ times____ .
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A(n) is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e. forever).
A(n) is a financial instrument that agrees to pay an equal amount of money per period into the indefinite future (i.e. forever).
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When using a present value of an annuity table
When using a present value of an annuity table
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When using a future value of an annuity table
When using a future value of an annuity table
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____is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.
____is interest that is paid not only on the principal, but also on any interest earned but not withdrawn during earlier periods.
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____is the return earned by someone who has forgone current consumption.
____is the return earned by someone who has forgone current consumption.
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More frequent compounding results in____ future values and _____ present values than less frequent compounding at the same interest rate.
More frequent compounding results in____ future values and _____ present values than less frequent compounding at the same interest rate.
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The present value of a(n)_____ is determined by dividing the annual cash flow by the interest rate.
The present value of a(n)_____ is determined by dividing the annual cash flow by the interest rate.
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Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the
Finding the discounted current value of $1,000 to be received at the end of each of the next 5 years requires calculating the
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Study Notes
Time Value of Money - Chapter 5
- Simple interest is calculated by multiplying principal by interest rate, by the number of time periods.
- Present value represents the present worth of a future sum of money.
- Future value represents the value of an asset or cash flow at a specified date in the future.
- The process of finding present values is called discounting.
- Annuity due refers to an annuity in which payments are made at the beginning of each period.
- A perpetuity refers to a financial instrument that agrees to pay an equal amount of money per period into the indefinite future.
- The effective rate of interest is determined by dividing the annual cash flow by the interest rate.
- The effective interest rate is the actual rate of interest earned.
- The nominal rate is the stated annual interest rate.
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Description
This quiz covers key concepts from Chapter 5 on the Time Value of Money. Explore topics such as simple interest, present and future value, and different types of annuities. Test your understanding of effective and nominal interest rates as you delve into financial calculations.