1.How much will $1000 deposit in savings account earning a compound annual interest rate of 6% be worth at the end of the following number years? a) 3 years$1,191
b) 5 years$1,338
c) 10 years$1,791

2. If you require a 9% return on your investment which would you prefer? a) $5,000 todayPV = $5,000
b) $15,000 five years from todayPV = $9,748.50
c) $1,000 per year for 15 yearsPV = $8061
Select option b

3.The Lancer Leasing Company has agreed to lease a hydraulic trencher to the Chavez Excavation Company for $20,000 per year over the next 8 years. Lease payments are to be made at the beginning of each year. Assuming that Lancer leasing company requires a 9% rate of return, what is the PV of payments?

PV = $120,663

4.The Mutual Assurance and life Company is offering an insurance policy under either of the following two terms: a) Make a series of 12 payments of $1,200 at the beginning of each of the next 12 years (first payment being made today) b) Make a single lump-sum payment today of 10,000 and receive coverage for the next 12 years If you had investment opportunities offering an 8% annual return, which alternative would you prefer?

a) PV = $9,766.66
b) PV = $10,000
Select option a

5.A leading broker has advertised money multiplier certificates that will triple your money in 9 years; that is if you buy one for $333.33 today, it will pay you $1,000 at the end of 9 years? What rate of return will you earn on this money multiplier certificates?

i = 13.073%

6.Given two following mutually exclusive alternatives:
a) Alternative A: initial cost $100, annual benefits $60, useful life 7 years b) Alternative B: initial cost $60, annual benefits $20, useful life 7 years Which alternative is preferable if i = 12%?

...Time Value of Money Practice Problems − Solutions
Dr. Stanley D. Longhofer 1) Jim makes a deposit of $12,000 in a bank account. The deposit is to earn interest annually at the rate of 9 percent for seven years. a) How much will Jim have on deposit at the end of seven years? P/Y = 1, N = 7, I = 9, PV = 12,000, PMT = 0 ⇒ FV = $21,936.47 b) Assuming the deposit earned a 9 percent rate of interest compounded quarterly, how much would he have at the end of seven years? P/Y = 4, N =...

...each. Which one of the
following statements is correct given these two investment options?
a. Both options are of equal value given that they both provide $20,000 of income.
b. Option A is the better choice of the two given any positive rate of return.
c. Option B has a higher presentvalue than option A given a positive rate of return.
d. Option B has a lower future value at year 5 than option A given a zero rate of return.
e....

...Reserve of cash flow hedge will primarily be in relief to economic account in the following exercise.
The Group is exposed to consequential risks by the variation of the rates of change, that you/they can influence on its economic result and on the value of the clean patrimony. Particularly:
Whereas the societies of the Group sustain costs denominated in different currencies by those of denomination of the respective proceeds, the variation of the rates of change can influence...

...Presentvalue is where the value on a set date of a future payment is discounted to reflect the time value of money and other factors. This can also apply to a series of future payments. Presentvalue calculations are commonly utilized in business and economics to provide a way to compare cash flows at different times. Presentvalue can be described as the current worth of a future...

.... To find the PVA, we use the equation:
PVA = C({1 – [1/(1 + r)]t } / r )
PVA = $60,000{[1 – (1/1.0825)9 ] / .0825}
PVA = $370,947.84
The presentvalue of the revenue is greater than the cost, so your company can afford the equipment.
7. Here we need to find the FVA. The equation to find the FVA is:
FVA = C{[(1 + r)t – 1] / r}
FVA for 20 years = $3,000[(1.08520 – 1) / .085]
FVA for 20 years = $145,131.04
FVA for 40 years =...

...corporate finance.
3. Which of the following correctly completes the next sentence? The value of any asset is the presentvalue of all future
a. 0 profits it is expected to provide
b. 0 revenue it is expected to provide
c. 0 net working capital it is expected to provide
d. 0 cash flows it is expected to provide
Objective: Compare and contrast the market value of an asset or liability from the book...

...PresentValue is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the presentvalue of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations.
PresentValue of...

...Time Value of Money
The time value of money (TVM) or, discounted presentvalue, is one of the basic concepts of finance and was developed by Leonardo Fibonacci in 1202. The time value of money (TVM) is based on the premise that one will prefer to receive a certain amount of money today than the same amount in the future, all else equal. As a result, when one deposits money in a bank account, one demands (and earns)...