TEST BANK: TIME VALUE OF MONEY (Difficulty: E = Easy‚ M = Medium‚ and T = Tough) Multiple Choice: Problems Easy: FV of a single payment Answer: d Diff: E . You deposit $2‚000 in a savings account that pays 10 percent interest‚ compounded annually. How much will your account be worth in 15 years? a. $2‚030.21 b. $5‚000.00 c. $8‚091.12 d. $8‚354.50 e. $9‚020.10 FV of a single payment Answer: c Diff: E . You deposit $1‚000 in a savings account that pays 9 percent
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Compound Interest Tables 3. Continuous Compounding 4. Effective Annual Rate 5. Calculations Involving Fractional Years B. Annuities 1. Ordinary Annuities (Annuities in Arrears) 2. Annuities Due 3. Deferred Annuities 4. Continuous Payment Annuities 5. Perpetuities 6. Calculations Involving Fractional Years 7. Amortization Schedules II. Break-Even Analysis and Financial Forecasting
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Exam 2 Finance 470 1. When is EAC analysis appropriate for comparing two or more projects? Why is this method used? Are there any implicit assumptions required by this method that you find troubling? Explain. The EAC approach is appropriate when comparing mutually exclusive projects with different lives that will be replaced when they wear out. This type of analysis is necessary so that the projects have a common life span over which they can be compared; in effect‚ each project is assumed
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mergers‚ retirement planning‚ and amortization of loans and saving‚ and investment management. Each of these applications has one or more components of TVM. Either present or future value‚ present value of perpetuity‚ loan amortization‚ cash flow diagram‚ or present and future value of an annuity and discounted cash flow. Capital budgeting According to Garrison (1988)‚ capital budgeting is an investment concept‚ that requires the commitment of funds now in order to receive some desired returns
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MGCR 341: Finance 1 Vadim di Pietro Assignment 1: Solutions Topic: Time value of money: Retirement savings problem [pic] 1) Today is July 1‚ 2010. You just graduated university. You plan to take a year off to travel and then start work one year from today. Your first monthly salary of $5‚000 will be paid on August 1‚ 2011. Assume your monthly salary will increase by 0.8% each month thereafter‚ until you retire. Suppose that you plan to retire on July 1‚ 2041‚ right after receiving your
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Chapter 5: Time Value of Money Multiple Choice Questions 1. What is the total amount accumulated after three years if someone invests $1‚000 today with a simple annual interest rate of 5 percent? With a compound annual interest rate of 5 percent? A. $1‚150‚ $1‚103 B. $1‚110‚ $1‚158 C. $1‚150‚ $1‚158 D. $1‚110‚ $1‚103 Level of difficulty: Easy Solution: C. Simple interest rate: $1‚000 + ($1‚000)(5%)(3) = $1‚150 Compound interest rate: $1‚000(1.05)3 = $1‚158 2
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CHAPTER 5 The Time Value of Money CHAPTER ORIENTATION In this chapter the concept of a time value of money is introduced‚ that is‚ a dollar today is worth more than a dollar received a year from now. Thus if we are to logically compare projects and financial strategies‚ we must either move all dollar flows back to the present or out to some common future date. CHAPTER OUTLINE I. Compound interest results when the interest paid on the investment during the first period
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com/question/1598103/ACC-561-IMPORTANT-TUTORIALS 8 # ________________ is the group of assets such as stocks and bonds held by an investor. Portfolio Diversification Stock Bundle None of the given options 9 # _________ is a special case of annuity‚ where the stream of cash flows continues forever. Ordinary Annuity Perpetuity Dividend Interest 10 # in the formula ke >= (D1/P0) + g‚ what does (D1/P0) represent?
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HEC Paris Financial Markets Spring 2012 Final Exam “Cheat Sheet” 0. Basic Statistics (a) Consider an n-outcome probability space with probabilities p1 ‚ p2 ‚ . . . ‚ pn . Consider two discrete random variables X and Y with outcomes (X1 ‚ X2 ‚ . . . ‚ Xn ) and (Y1 ‚ Y2 ‚ . . . ‚ Yn ). 2 The we have the following formulas for means (µX ‚ µY )‚ variance (σX )‚ standard deviation (σX )‚ covariance (σX‚Y )‚ and correlation (ρX‚Y ) µX = EX = E(X) = p1 X1 + p2 X2 + · · · + pn Xn µY = EY = E(Y ) =
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for 20 years? [$19964.12] 3. What is the value of a $100 perpetuity if interest is 7%? [$1428.57] 4. You deposit $13‚000 at the beginning of every year for 10 years. If interest is being paid at 8%‚ how much will you have in 10 years? [$203391.33] 5. You are getting payments of $8000 at the beginning of every year and they are to last another five years. At 6%‚ what is the value of this annuity? [35720.84] 6. How much would you have to deposit today
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