FIN 571 Week 3 Chapter 5 Quiz
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FIN 571 Week 3 Chapter 5 Quiz

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A dollar invested today at 7.5 percent interest compounded annually will be worth _______ one year from now. Joseph signs a contract with a company that will pay him $25,000. Following the principles of the time value of money, Joseph would be best off if he received payment: Real-world investments often involve many payments received or paid over time. Managers refer to this as a ___________________. You put $100 in the bank now, $200 in the bank a year from now, and $300 in the bank in two years. How much money will you have available 3 years from now if you earn a 7.5% rate of interest? (Calculate the future value of this stream of cash flows. Refer to Example 5.6.) Today you deposit $1000 in an account paying 6% interest. At the end of years 1, 2 and 3 you will deposit $100 in that account. What is the present value of that stream of cash flows? A dollar invested today at 8.0 percent interest compounded annually will be worth _______ three years from now. The time value of money concept states that a dollar today is worth _______ a dollar tomorrow. True or false: The time value of money functions that are provided by your financial calculator are also available as functions in an Excel spreadsheet. Today you deposit $1000 in an account paying 6% interest. At the end of years 1, 2 and 3 you will deposit $100 in that account. How much will you have at the end of year 4? You will receive $100 in 1 year, $200 in 2 years and $300 in 3 years. If you can earn a 7.5% rate of interest, what is the present value of this stream of cash flows? (Please note that you receive nothing immediately - there is no initial payment). A dollar invested today at 7.5 percent interest compounded annually will be worth _______ one year from now. In Excel, cash inflows are recognized as ______ values and cash outflows are recognized as ______ values. Interest rates should be entered as ______. Which of the following is a perpetuity? You put $100 in the bank now, $200 in the bank a year from now, and $300 in the bank in two years. How much money will you have available 3 years from now if you earn a 7.5% rate of interest? (Calculate the future value of this stream of cash flows. Refer to Example 5.6.) $200 at the end of each year forever at 10% per year is worth how much today? Today you deposit $1000 in an account paying 6% interest. At the end of years 1, 2 and 3 you will deposit $100 in that account. What is the present value of that stream of cash flows? A fixed stream of cash flows that ends after a specified number of years is called a(n): A perpetuity is a constant stream of cash flows for a(n) ______ period of time. Find the future value of an annuity of $100 per year for 10 years at 10 percent per year. An ordinary annuity is a series of level payments that begin ____. A traditional (non-growing) annuity consists of a(n) ________ stream of cash flows for a fixed period of time. What is the present value of an annuity consisting of 20 end of year payments of $500 when the interest rate is 11 percent? Use your financial calculator. The interest rate on the financial calculator is expressed as a Which of the following is a proper definition for the effective annual interest rate? Thefuture value of an annuity that lasts n years is equal to A series of level payments that begins immediately for a specified period of time is called a(n): Inflation can be defined as What is the future value of a series of $2000 end of year deposits into an IRA account paying 5 percent interest, over a period of 35 years? Use your financial calculator. The effective annual interest rate is also known as the ______________. True or false: the nominal interest rate can be defined as an interest rate quoted today by a financial institution on a loan or investment, such as an APR or a periodic rate. Find the future value of an annuity of $100 per year for 10 years at 10 percent per year. An annuity due is a series of level payments that begin ____. Real cash flow must be discounted by the The best known price index used by economists who measure inflation is ________. To use your financial calculator to solve annuity problems, you use the _____ key for entry of the constant payment C. Which type of interest rate is generally quoted for loans and by banks and other financial institutions? Which of the following statements are true regarding the present value of a stream of cash payments?

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