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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Money is an essential part of everyday existence and in order to understand and handle money matters‚ financial managers must understand how factors such as time and discount interest rates affect value. Money has a time value associated with it and therefore‚ a dollar today is worth more than a dollar in the future (Block & Hirt‚ 2005). Today money can be invested to earn interest to create more cash later or decrease the value over time. This paper will explain various financial applications of
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Corporations 6) Accounts payable is a A) Current Asset. B) Long-term Asset. C) Current Liability. D) Long-term Liability. Section: 2.2 The Balance Sheet 7) Dustin ’s Donuts experienced a decrease in the value of the trademark of a company it acquired two years ago. This reduction in value results in A) an impairment charge. B) goodwill. C) depreciation expense. D) an operating expense. Section: 2.2 The Balance Sheet Use the
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Fitness and Nutrition Worksheet In order to obtain optimal health‚ it is critical to be physically fit and eat a healthy and balanced diet. Becoming knowledgeable about what it means to be physically fit and learning how to evaluate the nutritional value of what you eat may greatly increase your ability to improve your health and wellness. In this three-part worksheet‚ you identify the five components of health related fitness‚ critique a recipe for nutritional value‚ and respond to two short
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to the questions. Cite the sources in the text and list them at the bottom of the table. |What criterion must be met |Consistency: Important when comparing data to make sure the data compared was prepared the correct way and done the same each time. | |for true comparability? |
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Associate Level Material Conflicts Are Important Worksheet In this assignment‚ you must write 300 to 450 words on conflict and conflict management. Record your answers in this worksheet. Part 1: The Five Conflict Types Describe each of the five conflict types using paragraph form. 1. Pseudo conflicts: Pseudo conflicts are situations that aren’t perceived as such‚ but are the primary result between two different causes. The first cause can result from faulty assumptions where the
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The Present and Future Price of Money Trident University International FIN 501 Module 2: Case Assignment Dr. John Halstead One of the most important concepts about saving and investing is the time value of money. It can be used to compare investment alternatives and to solve problems involving loans‚ mortgages‚ leases‚ savings‚ and annuities. This means money paid out or received in the future is not equivalent to money paid out or received today because inflation erodes
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The value of Time The value of time is limitless‚ it cannot be measured. The value of time arises from the fact that human life is short but he has to do a lot of works within the short span of time. Each work requires some time. If the work is not finished in time‚ it may not be finished at all. That explains why time is so valuable and it should not be lost for nothing. Tome goes on like the tide of a river and it never waits for anybody. Lost time can never be found again. Misuse of time
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TIME VALUE Time Value • Interest Rates • Compounding • Discounting • Effective Rates • Annuities • Perpetuities 2 Interest Rates • Types – Bank rate vs. Prime rate – Mortgage rates – Deposit‚ Loan‚ Credit rates • Movement – Demand / Supply – Inflation/ Deflation – Government intervention 3 Main Components 1. Real 2. Inflation 3. Risk *Note: - Risk Free (Rf) = Real + Inflation - Nominal = Rf + Risk Premium 4 Risk Free & Real Rate • Risk Free (Rf) = Real +
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TIME VALUE OF MONEY 1. If you were scheduled to receive Rs 100‚000 five years hence‚ but you wish to sell your contract note for its present value‚ which type of compounding would you rather have the purchaser of your contract note to use to find the purchase price‚ 8 percent compounded: (a) (b) (c) (d) (e) Continuously Quarterly Semi-annually Annually None of the above 2. According to the rule of 69‚ the doubling period is equal to (a) (b) (c) (d) (e) 0.25 + (69/ Interest rate) 0.35 + (69/ Interest
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