10 Questions
What is the formula for future value?
$FV = PV(1 + r)^t$
What does the interest rate represent in the context of time value of money?
The 'exchange rate' between earlier money and later money
What is the formula to find the present value given the future value?
$PV = \frac{FV}{(1 + r)^t}$
What happens to the present value for a given interest rate as the time period increases?
Decreases
What happens to the present value for a given time period as the interest rate increases?
Decreases
What is the formula to find the future value of an investment?
$FV = PV(1 + r)^t$
What does the interest rate represent in the context of time value of money?
Exchange rate between earlier money and later money
What is the formula to find the present value of a future amount?
$PV = FV / (1 + r)^t$
How does the present value change for a given interest rate as the time period increases?
Decreases
What is the relationship between the present value and the interest rate for a given time period?
Present value decreases as the interest rate increases
Test your understanding of the time value of money concepts with this review outline quiz for FIN 626. Topics include future value, present value, multiple cash flows, annuities, perpetuities, and basic definitions such as interest rate and discount rate.
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