BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 9 solutions complete answers

BUSI 320 Read & Interact Block, Hirt, & Danielsen Chapter 9 solutions complete answers

 

A decrease in the interest rate _____________ the present value of a single sum to be received in the future

 

A cash flow that provides only one payment could be considered an annuity.

 

The assumption for time value of money calculations is that        interest is used unless stated otherwise.

 

The factors needed to compute the interest rate on an annuity are:

 

Expressed in graphical form, the line showing the future value will       if the number of periods increase.

 

Expressed in graphical form, the bars showing the present value will       if the number of periods increase.

 

If all other factors remain the same, an increase in the number of periods will      the future value of an investment.

 

An investment of $2,000 pays 8% interest, how many periods will it take for the investment to have a value of $2,662?

 

$1,000 invested today will be worth $1,330 three years from today. What is the interest rate? Round to the nearest whole percentage.

 

You have $500,000 when you retire. What withdrawal can you make at the end of each of the next 20 years, assuming a 6% interest rate?

 

For semiannual compounding of a future value, the years are multiplied by 2 and the annual interest rate is divided by 2.

 

The two variables that determine the interest factor in a TVM table are the number of periods and the future value.

 

An increase in the discount rate would     the present value of an annuity.

 

Which of the following are core concepts related to the time value of money?

 

For which of the following would time value of money be a factor when considering an investment in or sale of an asset?

 

Expressing graphical form, the line showing the future value will ________ if the number of periods increase.

 

The present value of an annuity is the sum of the discounted values of a series of payments to be received in the future.

 

In order to present time value relationships in graphical form one must know ________.

 

$1,000 is invested for two years at 5% interest per annum. How much will your investment be worth after 2 years if compounded annually?

 

Which of the following are correct approaches for calculating the future value of a lump sum of $1,000 at 8% over three years.

 

If an investment of $2,000 pays 10% interest, how many periods will it take for the investment to have a value of $2,662?

 

A decrease in the discount rate would     the present value of an annuity.

 

$1,000 invested today will be worth $1,330.03 years from today. What is the interest rate? Round to the nearest whole percentage.

 

Which of the following are common methods for calculating the time value of money?

 

A decrease in the interest rate will

 

Match the situation on the left with appropriate time value of money calculation on the right.

 

Compound interest can be described as:

 

To calculate the present value of an annuity

 

Which of the following factors affect the calculation of present value?

 

As a rule, the future value of a single some it will be ________ its present value.

 

An decrease in the interest rate will:

 

You have won a small lottery of $1,000,000. However, instead of a lump sum amount, the lottery will pay you $50,000 per year for 20 years (total of $1,000,000). If interest is 4%, what is the present value of your winnings, assuming payments are received at the end of each year? (Note: Ignore inflation and taxes)

 

Calculate the present value of the following based on a discount rate of 5%. The answers may vary slightly due to rounding.

 

The future value of an annuity of $1,000 will be ________ the future value of a single sum of $1,000.

 

What factors must be known in order to calculate the current value of an annuity?

 

The financial calculator does not require us to use the      function.

 

Calculate and align the future values for the following lump sum investments:

 

You plan to invest $3,500 per year for 39 years into an investment plan. What will the value of the investment be after 39 years if the interest rate is 9% per year?

 

The factors needed to compute the interest rate using Excel functions are:

 

An increase in the number of periods will _____ the present value of a single sum.

 

An increase in the number of periods will _____ the present value of a single sum to be received in the future.

 

For an annuity, an increase in the number of periods will     the present value

 

In time value of money problems, a period could be

 

To find the present value of a single sum, what table or procedure would you use?

 

The present value of an annuity is the value today of a series of equal payments to be received in the future

 

The discount rate is the interest rate used to calculate the time value of money

 

A cash flow that provides only on payment could be considered an annuity

 

The future value of $1000 received today will be lower if the interest rate is lower

 

The assumption for time value of money calculation is that Compound interest is used unless stated otherwise

 

 

1.
$1,000 invested today will be worth $1,100 one year from today. What is the interest rate? Round to the nearest whole percentage.
 
 
4.
1. $1,000 to be received in 1 year
2. $1,000 to be received in 5 years
3. $1,000 to be received in 10 years
4. $1,000 to be received in 5 years using semi-annual compounding
 
 
5.
1. $1000 invested at 14% for 2 years
2. $1000 dollars invested for 3 years that 8%
3. $1000 invested for 4 years at 6%
4. $1000 invested at 5% for 5 years
 
 
6.
1. Value of $1,000 to be used received in 5 years

2. Value in 5 years of $1,000 invested today

3. Value today for $1,000 to be received each ear for the next 5 years

4. Value in 5 years of $1,000 to be invested each year for the next 5 years
 
 
8.
Calculate the future value of a lump sum of $1,000 invested for 4 years at 10%, using compounded quarterly.
 
 
12.
The discount rate is the interest rate used to calculate the time value of money.
 
 
14.
The factors needed to compute the interest rates are:
 
 
15.
The factors that needed to compute the number of periods are:
 
 
17.
For annuity, and increase in the number periods will ______ the present value.
 
 
18.
The future value of an amount is directly proportional to the interest rate.
 
 
20.
If an investment of $2,000 dollars pays 10% interest, how many periods will it take for the investment to have a value of $2,662?
 
 
22.
The present value of an annuity is the value of a series of equal payments to be received in the future
 
 
23.
The present value of money received today is _______ the same amount of money that will be received a year from today.
 
 
25.
To find the present value of a series of equal payments, what's table or procedure would you use?
 
 
27.
When using the time values to table, the interest factor that is looked up (i.e., PVIF, PFIVA, FVIF, FVIFA) is then ______ the dollar amount of the known variable (PV, PMT, or FV).
 
 
30.
Which of the following correctly contrasts and and ordinary annuity and an annuity date?
 
 
32.
You have want a small lottery of $1,000,000. However, instead of a lump sum amount, the lottery will pay you $50,000 dollars per year for 20 years (Total of $1 million.) If interest is 4%, what is the present value of your winnings, assuming payments are received at the end of each year? (Note: ignore inflation and taxes)
 
 
33.
You plan to invest $2,000 dollars per year for 10 years into an IRA. What was the value of the IRA be at the end of the 10 years if the interest rate is 4% per year? Your answer may vary due to rounding.
 
 
 
 
 
 
 
 
 

 

8.
The factors needed to compute the interest rate are:
 
 
9.
The factors needed to compute the number of periods are:
 
 
10.
For an annuity, an increase in the number of periods will ______ the present value.
 
 
11.
For an annuity, if all other factors remain the same, an increase in the number of periods _______ the future value.
 
 
13.
An increase in the interest rate will:
 
 
14.
An increase in the number of periods will ______ the present value of a single sum.
 
 
16.
In time value of money problems, a period could be
 
 
17.
An investment of $2,000 pay 8% interest, how many periods will it take for the investment to have a value of $2,662
 
 
18.
Joe is offered 5% simple interest at Bank A and 5% annual compound interest at Bank B. At the end of one year.
 
 
22.
To find the future value of a series of equal payments, what table or procedure would you use?
 
 
23.
To find the future value of a single amount, what table or procedure would you use?
 
 
24.
True of False: The present value of an annuity is the time value today of a series of equal payments to be received in the future.
 
 
25.
True or False: The future value of $1,000 received today will be lower if the interest rate is lower
 
 
26.
Use Excel, calculate the future value of $1,000 invested at 10% for 4 years. Hint: In Excel, click into an empty cell and type: =fv(. This will cause the following to appear, =fv(rate, nper,pmt, [pv], [type]). Factors in brackets sometimes are not needed so we ignore "type" in this problem. Now enter: =fv(10%,4,0,1000). In Excel, the rate may be alternately entered in decimal form (i.e., 0.1 vs. 10%).
 
 
 
 
 
 
 
 
 

28.
When using the time values tables, the interest factor that is looked up (i.e., PVIF, PFIVA, FVIF, FVIFA) is then ______ the follar amount of the known variable (PV,PMT, or FV)
 
 
30.
Which of the following correctly contrasts an ordinary annuity and an annuity due?
 
 
32.
Which of the following statements are true concerning the time value of money (TVM)?
 
 
33.
You have a piece of real estate for sale for $10,000. You are offered $1,295.05 per year for 10 years. What is the present value of this offer with interest rate of 5%?
 
 
35.
You plan to invest $3,500 per year for 39 years into an IRA. What will the value of the IRA be after 39 years if the interest rate is 9% per year? Your answer may vary due to rounding.