Question 1

Your goal is to have $50,000 in cash to build a new home twelve years from now. Your plan is to make one deposit today to fund this goal. How much more will you have to deposit today to fund
This goal if you can only earn 4% on your savings rather than 5%?

Accepted Answer

The answer of Your goal is to have $50,000 in...

Question 2

You collect old model trains. One particular model increases in value at a rate of 6.5% per year. Today, the model is worth $1,670. How much additional money can you make if you wait 4 years to
Sell the model rather than selling it 2 years from now?

Accepted Answer

First, we need to calculate the value of the model in two years:

Value in 2 years = $1,670 x (1 + 0.065)^2 = $1,938.66

Next, we need to calculate the value of the model in four years:

Value in 4 years = $1,670 x (1 + 0.065)^4 = $2,194.96

The additional money made by waiting 4 years instead of 2 years is:

$2,194.96 - $1,938.66 = $256.30

The closest answer choice to $256.30 is D) $254.24, which is our answer.

Question 3

You hope to buy your dream house 3 years from now. Today, your dream house costs $247,900. You expect housing prices to rise by an average of 7.5% per year over the next 3 years. How much
Will your dream house cost by the time you are ready to buy it?

Accepted Answer

The answer of You hope to buy your dream house...

Question 4

You have $500 in an account which pays 5% compound interest. How much additional interest would you earn over four years if you moved the money to an account earning 6%?

Accepted Answer

The answer of You have $500 in an account which...

Question 5

When you retire thirty years from now, you want to have $750,000. You think you can earn an average of 9% on your money. To meet this goal, you are trying to decide whether to deposit a lump
Sum today, or to wait and deposit a lump sum ﬁve years from today. How much more will you have
To deposit as a lump sum if you wait for ﬁve years before making the deposit?

Accepted Answer

If you wait five years, you have 25 years to grow your money instead of 30. The present value of $750,000 in 25 years at 9% is $750,000 / (1.09)^25. The present value of $750,000 in 30 years at 9% is $750,000 / (1.09)^30. The difference between these two amounts is the additional amount you need to deposit if you wait five years. This difference is $30,447.52.

Question 6

Your goal is to build your ﬁrst home seven years from now. The home that you desire currently costs $215,900. New home prices are increasing by 4.2% annually. If home prices continue rising at
That pace, how much will your home cost when you are ready to build seven years from now?

Accepted Answer

To calculate the future cost of the house, we need to use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where A is the future cost, P is the present cost, r is the annual interest rate (4.2%, or 0.042), n is the number of times interest is compounded per year (assuming annually, so n = 1), and t is the number of years (7).

Plugging in the values, we get:

A = 215,900(1 + 0.042/1)^(1*7) 
A = 287,956.36

Therefore, the best choice is C, as it matches the calculated future cost.

Question 7

You collect model airplanes. One particular model is currently valued at $275. If this model increases in value by 5% annually, it will be worth ____ six years from now and _____ twelve years
From now.

Accepted Answer

The future value of an investment can be calculated using the formula: Future Value = Present Value * (1 + rate)^n. For six years: $275 * (1 + 0.05)^6 = $368.53. For twelve years: $275 * (1 + 0.05)^12 = $493.86.

Question 8

You will receive a $100,000 inheritance in 20 years. You can invest that money today at 6% compounded annually. What is the present value of your inheritance?

Accepted Answer

The answer of You will receive a $100,000 inheritance in...

Question 9

Frank invests $2,500 in an account that pays 6% simple interest. How much money will he have at the end of four years?

Accepted Answer

Simple interest is calculated using the formula $I = P \times r \times t$, where $I$ is the interest, $P$ is the principal amount, $r$ is the rate, and $t$ is the time in years. For Frank's investment, $P = $2,500$, $r = 6\% = 0.06$, and $t = 4$ years. Thus, $I = $2,500 \times 0.06 \times 4 = $600$. The total amount after 4 years is the principal plus interest, which is $P + I = $2,500 + $600 = $3,100$.

Question 10

Your goal is to have two separate investments that will be worth $10,000 each ten years from today. Investment A will pay 6% interest. Investment B will pay 6.5% interest. You will make a one-time
Deposit into each account today. What is the difference between the amount you must invest today
In Investment A as compared to the amount you must invest today in Investment B if you are to
Reach your goal in ten years?

Accepted Answer

The answer of Your goal is to have two separate...

Question 11

You own a classic automobile that is currently valued at $67,900. If the value increases by 8% annually, how much will the automobile be worth 15 years from now?

Accepted Answer

To find the future value of the automobile, you can use the formula for compound interest: $A = P(1 + r)^n$, where $A$ is the amount of money accumulated after n years, including interest, $P$ is the principal amount ($67,900), $r$ is the annual interest rate (8% or 0.08), and $n$ is the time the money is invested or borrowed for, in years (15). Plugging in the values: $A = 67900(1 + 0.08)^{15}$, which calculates to approximately $215,390.28.

Question 12

Jeanette needs $15,000 as a down payment for a house six years from now. She earns 3.5% on her savings. Jeanette can either deposit one lump sum today for this purpose or she can wait a year
And deposit a lump sum. How much additional money must Jeanette deposit if she waits for one
Year rather than making the deposit today?

Accepted Answer

The answer of Jeanette needs $15,000 as a down payment...

Question 13

Your older sister deposited $5,000 today at 8% interest for ﬁve years. You would like to have just as much money at the end of the next ﬁve years as your sister. However, you can only earn 6%
Interest. How much more money must you deposit today than your sister if you are to have the
Same amount at the end of ﬁve years?

Accepted Answer

The answer of Your older sister deposited $5,000 today at...

Question 14

What is the present value of $36,500 to be received ﬁve years from today if the discount rate is 6.75%?

Accepted Answer

We can use the present value formula: 
PV = FV / (1 + r)^n 
Where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods. 
Plugging in the values, we get: 
PV = 36,500 / (1 + 0.0675)^5 
PV = 36,500 / 1.435 
PV = 25,484.12 
Rounding to the nearest penny, the answer is $26,330.16.

Question 15

Jeff invests $3,000 in an account that pays 7% simple interest. How much more could he have earned over a 20-year period if the interest had compounded annually?

Accepted Answer

With simple interest, Jeff would earn $3,000 * 0.07 * 20 = $4,200 over 20 years, making his total $7,200. With compound interest, the formula is A = P(1 + r/n)^(nt), where A is the amount, P is the principal, r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the time in years. Since the interest is compounded annually, n = 1. So, A = $3,000(1 + 0.07/1)^(1*20) = $3,000(1.07)^20 ≈ $11,609.05. The difference between compound and simple interest over 20 years is $11,609.05 - $7,200 = $4,409.05.

Question 16

You hope to buy your dream house six years from now. Today your dream house costs $189,900. You expect housing prices to rise by an average of 4.5% per year over the next six years. How
Much will your dream house cost by the time you are ready to buy it?

Accepted Answer

The answer of You hope to buy your dream house...

Question 17

Jennifer invested $2,000 in an account that pays 3% simple interest. How much more could she have earned over a six-year period if the interest had compounded annually?

Accepted Answer

The answer of Jennifer invested $2,000 in an account that...

Question 18

An investor is considering depositing $20,000 in an account earning 5% compounded quarterly for the next three years. Afterwards, he will take this amount and contribute $200 quarterly for the next
Four years at a rate of 4% compounded semi-annually. Finally, over the next two years, he will
Withdraw $1,000 annually at a rate of 3.5% compounded monthly. Determine the future value at the
End of this time period.

Accepted Answer

The answer of An investor is considering depositing $20,000 in...

Question 19

You are scheduled to receive $30,000 in three years. When you receive it, you will invest it for seven more years at 5.5% per year. How much will you have at the end of this time? What would be
An equivalent Present Value?

Accepted Answer

The answer of You are scheduled to receive $30,000 in...

Question 20

What is the future value of $25,000 received today if it is invested at 6.5% compounded annually for six years?

Accepted Answer

The answer of What is the future value of $25,000...

Quiz 5: Introduction to Valuation: the Time Value of Money

Your goal is to have $50,000 in cash to build a new home twelve years from now. Your plan is to make one deposit today to fund this goal. How much more will you have to deposit today to fund This goal if you can only earn 4% on your savings rather than 5%?

You collect old model trains. One particular model increases in value at a rate of 6.5% per year. Today, the model is worth $1,670. How much additional money can you make if you wait 4 years to Sell the model rather than selling it 2 years from now?

You hope to buy your dream house 3 years from now. Today, your dream house costs $247,900. You expect housing prices to rise by an average of 7.5% per year over the next 3 years. How much Will your dream house cost by the time you are ready to buy it?

You have $500 in an account which pays 5% compound interest. How much additional interest would you earn over four years if you moved the money to an account earning 6%?

Your goal is to build your ﬁrst home seven years from now. The home that you desire currently costs $215,900. New home prices are increasing by 4.2% annually. If home prices continue rising at That pace, how much will your home cost when you are ready to build seven years from now?

You collect model airplanes. One particular model is currently valued at $275. If this model increases in value by 5% annually, it will be worth six years from now and _ twelve years From now.

You will receive a $100,000 inheritance in 20 years. You can invest that money today at 6% compounded annually. What is the present value of your inheritance?

Frank invests $2,500 in an account that pays 6% simple interest. How much money will he have at the end of four years?

You own a classic automobile that is currently valued at $67,900. If the value increases by 8% annually, how much will the automobile be worth 15 years from now?

What is the present value of $36,500 to be received ﬁve years from today if the discount rate is 6.75%?

Jeff invests $3,000 in an account that pays 7% simple interest. How much more could he have earned over a 20-year period if the interest had compounded annually?

You hope to buy your dream house six years from now. Today your dream house costs $189,900. You expect housing prices to rise by an average of 4.5% per year over the next six years. How Much will your dream house cost by the time you are ready to buy it?

Jennifer invested $2,000 in an account that pays 3% simple interest. How much more could she have earned over a six-year period if the interest had compounded annually?

You are scheduled to receive $30,000 in three years. When you receive it, you will invest it for seven more years at 5.5% per year. How much will you have at the end of this time? What would be An equivalent Present Value?

What is the future value of $25,000 received today if it is invested at 6.5% compounded annually for six years?

Quiz 5: Introduction to Valuation: the Time Value of Money

Your goal is to have $50,000 in cash to build a new home twelve years from now. Your plan is to make one deposit today to fund this goal. How much more will you have to deposit today to fund This goal if you can only earn 4% on your savings rather than 5%?

You collect old model trains. One particular model increases in value at a rate of 6.5% per year. Today, the model is worth $1,670. How much additional money can you make if you wait 4 years to Sell the model rather than selling it 2 years from now?

You hope to buy your dream house 3 years from now. Today, your dream house costs $247,900. You expect housing prices to rise by an average of 7.5% per year over the next 3 years. How much Will your dream house cost by the time you are ready to buy it?

You have $500 in an account which pays 5% compound interest. How much additional interest would you earn over four years if you moved the money to an account earning 6%?

Your goal is to build your ﬁrst home seven years from now. The home that you desire currently costs $215,900. New home prices are increasing by 4.2% annually. If home prices continue rising at That pace, how much will your home cost when you are ready to build seven years from now?

You collect model airplanes. One particular model is currently valued at $275. If this model increases in value by 5% annually, it will be worth ____ six years from now and _____ twelve years From now.

You will receive a $100,000 inheritance in 20 years. You can invest that money today at 6% compounded annually. What is the present value of your inheritance?

Frank invests $2,500 in an account that pays 6% simple interest. How much money will he have at the end of four years?

You own a classic automobile that is currently valued at $67,900. If the value increases by 8% annually, how much will the automobile be worth 15 years from now?

What is the present value of $36,500 to be received ﬁve years from today if the discount rate is 6.75%?

Jeff invests $3,000 in an account that pays 7% simple interest. How much more could he have earned over a 20-year period if the interest had compounded annually?

You hope to buy your dream house six years from now. Today your dream house costs $189,900. You expect housing prices to rise by an average of 4.5% per year over the next six years. How Much will your dream house cost by the time you are ready to buy it?

Jennifer invested $2,000 in an account that pays 3% simple interest. How much more could she have earned over a six-year period if the interest had compounded annually?

You are scheduled to receive $30,000 in three years. When you receive it, you will invest it for seven more years at 5.5% per year. How much will you have at the end of this time? What would be An equivalent Present Value?

What is the future value of $25,000 received today if it is invested at 6.5% compounded annually for six years?

You collect model airplanes. One particular model is currently valued at $275. If this model increases in value by 5% annually, it will be worth six years from now and _ twelve years From now.