1) A $100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year. 2) An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment? 3) Which of the following investments has a larger future value? A $100 investment earning 10% per year for 5 years or a $100 investment earning 5% per year for 10 years? 4) The current price on a 60-inch flat panel LCD HD television is $2,300. Big screen HD television prices have dropped at an average rate of 9% per year in recent years. If you expect this trend to continue, how much will this style of television cost in three years? 5) You have purchased a Treasury bond that will pay $10,000 to your newborn child in 15 years. If this bond is discounted at a rate of 4% per year, what is today's price (present value) for this bond? 6) Your university is running a special offer on tuition. This year's tuition cost is $18,000. Next year's tuition cost is scheduled to be $19,080. The university offers to discount next year's tuition at a rate of 6% if you agree to pay both years' tuition in full today. How much is the total tuition bill today if you take the offer? 7) An investment promises a payoff of $195 three years from today. At a discount rate of 8% per year, what is the present value of this investment? 8) Your parents plan to spend $20,000 on a car for you upon graduation from college. If you will graduate in three years and your parents can earn 4% annually on their investment, how much money must they set aside today for your car? 9) You intend to buy a vacation home in seven years and plan to have saved $50,000 for a down payment. How much money would you have to place today into an investment that earns 8% per year to have...

...Value of Money/Exercise # 1
Financial Management: Prof Ramakar Jha
1
Exercise 1: Time Value of Money
Set 1
1. You are planning to retire in twenty years. You'll live ten years after retirement.
You want to be able to draw out of your savings at the rate of Rs.10,000 per year. How
much would you have to pay in equal annual deposits until retirement to meet your
objectives? Assume interest remains at 9%. [Rs.1254]
2....

...of $100 be after 5 years at 10% compound interest?
a. $161.05
b. $134.54
c. $127.84
d. $151.29
e. $143.65
2. Suppose a U.S. government bond promises to pay $2,249.73 three years from now. If the going interestrate
on 3-year government bonds is 6%, how much is the bond worth today?
a. $2,011.87
b. $2,591.45
c. $2,324.89
d. $1,888.92
e. $2,854.13
3. Sims Inc. earned $1.00 per share in 2000. Five years later, in 2005, it earned $2.00. What was the...

...difference between the interestrates on AAA corporate bonds and
U.S. Treasury notes?
3. Your father is about to retire. His firm has given him the option of retiring with a
lump sum of $50,000 in ten years or an annuity of $8,000 for ten years. Which is
worth more now, if the discount rate is (a) 6% (b) 19%?
4. Suppose you open a saving account with $1,800 earned in a summer job. The
account's stated interestrate is...

...Which one of the following statements is correct concerning annual percentages rates (APRs)?
Answer: The APR is equal to the monthly interestrate multiplied by 12
Give an interestrate of zero percent, the future value of a lump sum invested today will always:
Answer: remain constant
Answer: II and IV
A firm created as a separate and distinct legal entity that may be owned by one or more...

...
Understanding InterestRates
4.1 Measuring InterestRates
1) The concept of ________ is based on the common-sense notion that a dollar paid to you in the future is less valuable to you than a dollar today.
A) present value
B) future value
C) interest
D) deflation
Answer: A
2) The present value of an expected future payment ________ as the interestrate increases.
A) falls
B)...

...
Raising the InterestRate
Principles of Finance
Introduction
After years of declining interestrates, we are facing a dilemma; should the Federal government increase rates to contain inflation, or keep rates low to boost the US economy? Increases in consumption of oil, metals, materials, and food, both foreign and domestic, are increasing demand. Prices are rising on a global scale as demand...

...2013 6:30 PM IST (UTC +0530).
Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all dollars without decimals and all interestrates in percentage with up to two decimals. Read the syllabus for examples.The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds...

...
Money Banking and financial Markets,
InterestRates
An interestrate is the rate at which interest is paid by borrowers for the use of money that they borrow from a lender. Specifically, the interestrate is a percent of principal paid a certain amount of times per period. Small companies often borrow capital from banks to buy new...

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