Questions on Calculation the Time Value of Money
Question 1
(5 points) $100 today is worth the SAME as $100 tomorrow.
True
False FALSE
Question 2
(5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years.
True TRUE
False
Question 3
(5 points) Megan wants to buy a designer handbag and plans to earn the money babysitting. Suppose the interest rate is 6% and she is willing to wait one year to purchase the bag. How much babysitting money (to the nearest whole dollar) will she need to earn today to buy the bag for $400 one year from now? (Enter just the number without the $ sign or a comma)
Answer for Question 3 is (377)
Question 4
(10 points) Jeff has $1,000 that he invests in a safe financial instrument expected to return 3% annually. Marge has $500 and invests in a more risky venture that is expected to return 7% annually. Who has more after 20 years? And how much does he/she have in FV terms?
Jeff; 1935
Marge; 1935
Marge; 1604
Jeff; 1806
Jeff; 1604
Marge; 1806
( solution : JEFF : 1,806.11 , MARGE 1935 ) ANSWER I TICK : 1935
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent over the last 70 years, what is the current value of that investment? (Round to the nearest whole dollar; enter just the number without the $ sign or a comma)
Answer for Question 5 is : $ 165
Question 6
(10 points) Cindy and Jennifer are twin sisters. They both have a $10,000 investment earning 7%. Cindy withdraws $2,000 of her money now and goes on a shopping spree. Jennifer keeps all her money invested. After 15 years, when each are looking for money to put a down payment on a house, how much more does Jennifer have? (Enter just the number without the $ sign or a comma; round to the nearest whole dollar.)
Answer for Question 6 : 5518
ROUGH WORK: cindy 22,072.25 jenefer 27,590.32
Question 7
(10 points) The Johnson family is worried about their ability
(5 points) $100 today is worth the SAME as $100 tomorrow.
True
False FALSE
Question 2
(5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years.
True TRUE
False
Question 3
(5 points) Megan wants to buy a designer handbag and plans to earn the money babysitting. Suppose the interest rate is 6% and she is willing to wait one year to purchase the bag. How much babysitting money (to the nearest whole dollar) will she need to earn today to buy the bag for $400 one year from now? (Enter just the number without the $ sign or a comma)
Answer for Question 3 is (377)
Question 4
(10 points) Jeff has $1,000 that he invests in a safe financial instrument expected to return 3% annually. Marge has $500 and invests in a more risky venture that is expected to return 7% annually. Who has more after 20 years? And how much does he/she have in FV terms?
Jeff; 1935
Marge; 1935
Marge; 1604
Jeff; 1806
Jeff; 1604
Marge; 1806
( solution : JEFF : 1,806.11 , MARGE 1935 ) ANSWER I TICK : 1935
Question 5
(10 points) Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent over the last 70 years, what is the current value of that investment? (Round to the nearest whole dollar; enter just the number without the $ sign or a comma)
Answer for Question 5 is : $ 165
Question 6
(10 points) Cindy and Jennifer are twin sisters. They both have a $10,000 investment earning 7%. Cindy withdraws $2,000 of her money now and goes on a shopping spree. Jennifer keeps all her money invested. After 15 years, when each are looking for money to put a down payment on a house, how much more does Jennifer have? (Enter just the number without the $ sign or a comma; round to the nearest whole dollar.)
Answer for Question 6 : 5518
ROUGH WORK: cindy 22,072.25 jenefer 27,590.32
Question 7
(10 points) The Johnson family is worried about their ability