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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intrinsic value of securities 4.Understand the tools in corporate finance and apply them to solve the key issues in corporate finance 5.Discover the complex interaction between the economy and the financial markets 6.Become comfortable engaging in discussion and debate over finance and related issues Specific objectives : 1. Understand the tools in analyzing firm’s financial statements 2.Compute the expected rate of return for investment projects. 3.Apply several valuation methods to value projects
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Indicators • What ratios are used for measuring profitability‚ efficiency‚ liquidity and leverage? 7 Key topics: Value Chapter 5: The Time Value of Money • Why is there a time value of money? • How can we calculate future from present values and vice versa? • What are annuities & perpetuities? • How can we calculate the present value of annuities & perpetuities? 8 Key topics: Value Chapter 6: Valuing Bonds
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1. This is a measure summarizing the overall past performance of an investment. Average Return 2. This includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment. Dollar Return 3. Which of these statements is true? When people purchase a stock‚ the do not know their return‚ neither the short term nor the long-term. 4. This is the volatility of the investment‚ which includes firm-specific risk as well as market risk. Total risk 5. This
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Present value = $173‚876 = 20000 X 8.693793 Answer= $ 173‚876 Retirement money required b. How much will you need today as a single amount to provide the fund calculated in part A if you earn only 9% per year during the 20 years preceding retirement? n= 20 r= 9.00% FVIF= 20 periods‚ 9% = 5.604411 Amount required in 20 years = $ 173‚876 Amount to be invested = $ 31‚025 c. What effect would an increase in the rate you can earn both during and prior to retirement have on the values found in
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required rate of return and coupon rate on the value of a bond. Answer : . It is important for prospective bond buyers to know how to determine the price of a bond because it will indicate the yield received should the bond be purchased. In this section‚ we will run through some bond price calculations for various types of bond instruments. Bonds can be priced at a premium‚ discount‚ or at par. If the bond’s price is higher than its par value‚ it will sell at a premium because its interest rate
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Total 5.00 / 5.00 Question Explanation We have assumed time value of money is positive. Question 2 (5 points) At an interest rate of 10% it is better to have $200 today than $200 in 2 years. Your Answer Score Explanation False True Correct 5.00 Correct. Total 5.00 / 5.00 Question Explanation All about compounding. Question 3 (5 points) Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $250. At an interest rate
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interchangeably Answer Selected Answer: False Question 5 2 out of 2 points ._____Successful companies have been started by people who are not in it for the money. Answer Selected Answer: True Question 6 2 out of 2 points 6._____ Cost is the money and time you will have to invest –as well as the opportunities you will be giving up to start your business Answer Selected Answer: True Question 7 2 out of 2 points
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Financial Management FIN 5013 – Quiz 5 Chapter 4 Ali Nejadmalayeri October 23‚ 2007 NAME: 1. ID: __ __ __ __ __ __ __ __ __ __ __ __ __ __ Janet plans on saving $3‚000 a year and expects to earn 8.5%. How much will Janet have at the end of twenty-five years if she earns what she expects? AFV = $3‚000 × Enter 25 N Solve for (1 + .085) 25 − 1 = $3‚000 × 78.667792 = $236‚003.38 .085 8.5 I/Y PV -3‚000 PMT FV 236‚003.38 2. Winston Enterprises would like to buy some additional
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List of Theory Topics = PAPER F9 CAPITAL INVESTMENT APPRAISAL 1) Why Companies spends money on Capital Investment? 2) Stages in Capital Investment Process 3) For Capital investment appraisals why cash flows are more appropriate than Accounting profits 4) Meaning of Relevant Cash flows and examples of Relevant Cash flows 5) Why Time Value of Money is Key Concept in investment Appraisal? 6) Assumptions of discounted cash flows 7) How inflation may complicate analysis of Decisions Difference
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