10. Time Value of Money

Future cash flows expected from investment projects should be:

Which of the following equations correctly calculates the future value (FV) of \$15,000 invested at an annual interest rate of 15% compounded annually for 5 years?

Given a money factor of 0.0027 for a lease, what is the approximate annual interest rate?

You pay \$9,850 for a 180-day Treasury bill (T-bill) with a face value of \$10,000. What is the annualized discount rate (using a 360-day year) for this T-bill?

Which term describes the process of paying off a debt with a fixed payment plan over a specific period of time?

An immediate annuity consists of a series of:

What is the present value (PV) of the following set of cash flows, discounted at an annual rate of 8\%? \[\begin{align*}\text{Year 1:} & \quad \$1,000 \\\text{Year 2:} & \quad \$1,500 \\\text{Year 3:} & \quad \$2,000 \end{align*}\]Choose the closest answer.

The amount of interest paid is normally calculated on which of the following?

Which of the following best describes the difference between simple interest and compound interest?

Which of the following methods for evaluating a capital investment project ignores the time value of money?

When policy proceeds are received as a lump sum and then immediately invested, what type of financial arrangement is created?

What is the present value of an ordinary annuity of \$400 invested each year for 12 years at an annual interest rate of 6%? (Round your answer to the nearest dollar.)

A perpetuity has a present value (PV) of \$10,000. If the interest rate is 5\%, what is the annual payment (C) of the perpetuity?

Which of the following accounts uses time value of money concepts to value the account?

What is the present value of \$1,200 to be received in 18 years if the discount rate is 5\% per year, compounded annually?