UNDERSTANDING THE TIME VALUE MONEY FORMULA TIME VALUE OF MONEY TRIDENT UNIVERSITY INTERNATIONAL AVIE MARIE JOHNSTONE STRATEGIC CORPORATE FINANCE FIN501 MODULE 2 SESSION LONG PROJECT PROFESSOR WALTER
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Annuities # 2 Time Value of Money (TVM) Understanding how the time value of money works can be most easily explained by taking your initial investment let us say $10 by the end of year five it could be worth $100. This means you have earned $90 in the last five years. Next year‚ you invest $10 and at the end of year five it is worth $80 because interest has not accumulated on the time that was lost between year 1 and year 2. My example of this is that my fiancé put $3000 in each of his
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Bank Time Value of Money Analysis You have applied for a job with a local bank. As part of its evaluation process‚ you must take an examination on time value of money analysis covering the following questions. A. Draw time lines for (1) a $100 lump sum cash flow at the end of Year 2‚ (2) an ordinary annuity of $100 per year for 3 years‚ and (3) an uneven cash flow stream of -$50‚ $100‚ $75‚ and $50 at the end of Years 0 through 3. ANSWER: [Show S5-1 through S5-4 here.] A time line is
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Finance) 1. You have just calculated the present value of the expected cash flows of a potential investment. Management thinks your figures are too low. Which of the following actions would increase the present value of your cash flows? a. assume a longer stream of cash flows of the same amount b. increase the discount rate c. decrease the discount rate d. a and c 2. Your bank balance is exactly $10‚000. Three years ago you deposited $7‚938 and have not touched the account since. What annually compounded
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This is an example of a normative economic statement‚ as it implies that housing prices should be lowered as they are currently “overvalued”. Economists attempt to be scientific‚ through a “positive framework” by stating “what exists” based on evidence (positive) rather than “what should exist” (normative). Hence‚ this statement does not demonstrate sound economic thinking. If the statement was “Housing prices in Sydney are the highest they have ever been in history”‚ and was supported by relevant
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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)
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b 1. Your grandmother invested one lump sum 17 years ago at 4.25 percent interest. Today‚ she gave you the proceeds of that investment which totaled $5‚539.92. How much did your grandmother originally invest? a. $2‚700.00 b. $2‚730.30 c. $2‚750.00 d. $2‚768.40 e. $2‚774.90 d 2. Forty years ago‚ your father invested $2‚500. Today that investment is worth $107‚921. What is the average rate of return your father earned on his investment? a. 8.50 percent b. 9.33 percent c. 9.50 percent
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Can money buy you happiness? Money would probably be on the top of everyone’s list of things they desire‚ along with other things that only money could buy‚ but does that mean that money will make you happy? Happiness cannot be found in inanimate objects such as a new car or a huge house if you have no one to share it with. Money can lead to lots of lovely things and great opportunities but it can induce greed in a person‚ it’s like most things if you have too much of it all you want is more. It
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“Present value is the value on a given date of a future payment or series of future payments‚ discounted to reflect the time value of money and other factors such as investment risk. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful "like to like" basis.” (1) In this paper‚ we are going to examine why the concept of present value is so important to corporate finance. We are also going to complete some example
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How much must you invest at 10% interest in order to see your investment grow to $5‚000 in 5 years? Select one: A. $3‚070 B. $3‚415 C. $3‚105 D. none of these Feedback The correct answer is: $3‚105 Question 2 Correct Mark 1.00 out of 1.00 Flag question Question text Sydney saved $50‚000 during her first year of work after college and plans to invest it for her retirement in 40 years. How much will she have available for retirement if she can make 8% on her investment? Select one:
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