Question 1

Gretchen Enterprises borrowed $149,500 for two years from the bank. At the end of the two years, they repaid the loan with one payment of $176,590. What was the interest rate on the loan?

Accepted Answer

The answer of Gretchen Enterprises borrowed $149,500 for two years...

Question 2

Omar has an investment valued at $12,345 today. He made a one-time investment at 6.5% four years ago. Leon has an investment that is also valued at $12,345 today. Leon invested four years
Ago at 7.5%. Omar originally invested _____ and Leon invested _____.

Accepted Answer

We can use the formula A = P(1+r/n)^(nt) where A is the final value, P is the initial investment, r is the interest rate, n is the number of times compounded per year, and t is the number of years. We know that both Omar and Leon invested four years ago and their investments are worth $12,345 today. We also know that Omar invested at 6.5% and Leon invested at 7.5%. Let P1 be Omar's initial investment and P2 be Leon's initial investment. Then we have:

$12,345 = P1(1+0.065/1)^(1*4)
$12,345 = P2(1+0.075/1)^(1*4)

Simplifying these equations, we get:

P1 = $9,596.05
P2 = $9,243.94

Therefore, the answer is B.

Question 3

Tropical Tans is saving money to build a new salon. Three years ago, they set aside $12,000 for this purpose. Today, that account is worth $16,418. What rate of interest is Tropical Tans earning on this
Money?

Accepted Answer

To find the rate of interest, we can use the formula:
A = P(1+r/n)^(nt)
where A is the final amount, P is the initial amount, r is the interest rate, n is the number of times the interest is compounded per year, and t is the time in years.
In this case, P = $12,000, A = $16,418, t = 3 years and we don't know the rate of interest. We assume the interest is compounded annually (n =1), then we can rearrange the formula to solve for r:
r = n((A/P)^(1/nt) - 1)
r = 1((16,418/12,000)^(1/(1*3)) - 1) = 11.01%
Therefore, the best choice is C, 11.01%.

Question 4

The future value interest factor is calculated as:

Accepted Answer

The future value interest factor is calculated using the formula (1 + r)^t, where r is the interest rate and t is the number of periods.

Question 5

Lakeside Inc. invested $735,000 at an 11.25% rate of return. The company sold their investment for $1,067,425. How much longer would Lakeside have had to wait if they had wanted to sell their
Investment for $1.25 million?

Accepted Answer

The answer of Lakeside Inc. invested $735,000 at an 11.25%...

Question 6

Martha is going to receive $6,000 in two years from Tom. She will receive an additional $4,000 in three years from Tom. She earns 7.15% on her investments. How much is this money from Tom worth
To Martha today?

Accepted Answer

The answer of Martha is going to receive $6,000 in...

Question 7

The present value interest factor is calculated as:

Accepted Answer

The present value interest factor is calculated as 1/(1 + r)t, where r is the interest rate and t is the number of time periods. Option D is the only choice that matches this formula.

Question 8

The Smith Co. has $450,000 to invest at 5.5% interest. How much more money will they have if they invest these funds for eight years instead of ﬁve years?

Accepted Answer

The answer of The Smith Co. has $450,000 to invest...

Question 9

What is the future value of $4,160 invested for eight years at 8.5% compounded annually?

Accepted Answer

The future value of an investment is calculated using the formula FV = PV(1 + r)^n, where FV is the future value, PV is the present value or initial investment, r is the annual interest rate (in decimal form), and n is the number of years the money is invested for. Plugging in the given values: FV = $4,160(1 + 0.085)^8 = $7,989.71.

Question 10

Thirty years ago, your father invested $11,000. Today, that investment is worth $287,047. What is the average annual rate of return your father earned on his investment?

Accepted Answer

The answer of Thirty years ago, your father invested $11,000....

Question 11

Your grandmother invested one lump sum 42 years ago at 3.5% interest. Today, she gave you the proceeds of that investment which totaled $28,204.37. How much did your grandmother originally
Invest?

Accepted Answer

To solve the problem, we can use the formula for compound interest:

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

where A is the total amount, P is the principal (the amount invested), r is the annual interest rate, t is the number of years, and n is the number of times the interest is compounded per year.

Plugging in the given values, we get:

28,204.37 = P(1 + 0.035/1)^(1*42)

Simplifying:

28,204.37 = P(1.035)^42

28,204.37 = 39.08P

P = $6,650

Therefore, the original investment amount was $6,650, which corresponds to choice B.

Question 12

Thirty years ago, your father invested $6,000. Today that investment is worth $67,270.98. What is the average rate of return your father earned on this investment?

Accepted Answer

The answer of Thirty years ago, your father invested $6,000....

Question 13

Today, your grandmother gave you a gift of $25,000 to help pay for your college education. She told you that this amount was the result of a one-time investment at 8% interest 13 years ago. How
Much did your grandmother originally invest?

Accepted Answer

The correct answer is A.The formula for calculating the future value of an investment is:FV = PV * (1 + r)^nwhere:FV is the future valuePV is the present valuer is the annual interest raten is the number of yearsIn this case, we know that the future value is $25,000, the annual interest rate is 8%, and the number of years is 13. We can use the formula to solve for the present value:PV = FV / (1 + r)^nPV = $25,000 / (1 + 0.08)^13PV = $9,192.45Therefore, the grandmother originally invested $9,192.45.

Question 14

You deposit $3,000 in a retirement account today at 5.5% interest. How much more money will you have if you leave the money invested for forty-ﬁve years rather than forty years?

Accepted Answer

The answer of You deposit $3,000 in a retirement account...

Question 15

You own a classic automobile that is currently valued at $39,500. If the value increases by 6% annually, how much will the auto be worth ten years from now?

Accepted Answer

The answer of You own a classic automobile that is...

Question 16

You deposit $500,000 in a higher risk investment. Three years later, you receive $711,900 and withdraw your funds. Given this information calculate the interest earned at the end of year 3.

Accepted Answer

To calculate the interest earned, we need to subtract the initial deposit from the final amount received: 
Final amount - Initial deposit = Interest earned 
$711,900 - $500,000 = $211,900 
However, this is the total earnings over three years. To find the interest earned at the end of year 3, we need to divide by three: 
$211,900 / 3 = $70,633.33 
Finally, to find the interest earned at the end of year 3, we need to subtract the interest earned at the end of year 2: 
$70,633.33 - $10,537.33 = $60,096 
Therefore, the answer is C) $79,096.

Question 17

The Blackwell Co. expects to receive $135,000 from an insurance settlement four years from now. If the company can earn 11% on its investments, what is the value of the insurance settlement worth
Today?

Accepted Answer

We can use the formula for present value of a future sum of money:

PV = FV / (1 + r)^n

where PV is present value, FV is future value, r is the interest rate, and n is the number of periods.

In this case, FV = $135,000, r = 11%, and n = 4. Plugging in these values, we get:

PV = $135,000 / (1 + 0.11)^4
PV = $88,928.68

Therefore, the value of the insurance settlement today is $88,928.68, which corresponds to choice C.

Question 18

The James Co. plans on saving money to buy some new equipment. The company is opening an account today with a deposit of $15,000 and expects to earn 4% interest. After 3 years, the ﬁrm
Wants to add an additional $50,000 to the account. If the account continues to earn 4%, how much
Money will the James Co. have in their account ﬁve years from now?

Accepted Answer

To solve this problem, we need to use the compound interest formula:

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

Where:
A = the amount of money in the account after t years
P = the initial deposit (or present value) 
r = the interest rate (as a decimal) 
n = the number of times the interest is compounded per year 
t = the time (in years)

In this problem:
P = $15,000 (initial deposit)
r = 0.04 (4% interest)
n = 1 (interest compounded annually)
t = 5 (total time)

We can use this formula to find the amount of money in the account after 3 years (when the company adds $50,000) and then continue to compound the interest for the remaining 2 years:

A1 = 15,000(1 + 0.04/1)^(1*3) = $17,717.44
A2 = (17,717.44 + 50,000)(1 + 0.04/1)^(1*2) = $72,329.79

Therefore, the James Co. will have $72,329.79 in their account five years from now.

The answer is D.

Question 19

One year ago, you invested $2,500. Today it is worth $2,789.50. What rate of interest did you earn?

Accepted Answer

The answer of One year ago, you invested $2,500. Today...

Question 20

You deposit $1,000 in a retirement account today at 8.5% interest. How much more money will you have if you leave the money invested for 40 years rather than 35 years?

Accepted Answer

The answer of You deposit $1,000 in a retirement account...

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

Gretchen Enterprises borrowed $149,500 for two years from the bank. At the end of the two years, they repaid the loan with one payment of $176,590. What was the interest rate on the loan?

Omar has an investment valued at $12,345 today. He made a one-time investment at 6.5% four years ago. Leon has an investment that is also valued at $12,345 today. Leon invested four years Ago at 7.5%. Omar originally invested _ and Leon invested _.

Tropical Tans is saving money to build a new salon. Three years ago, they set aside $12,000 for this purpose. Today, that account is worth $16,418. What rate of interest is Tropical Tans earning on this Money?

The future value interest factor is calculated as:

Lakeside Inc. invested $735,000 at an 11.25% rate of return. The company sold their investment for $1,067,425. How much longer would Lakeside have had to wait if they had wanted to sell their Investment for $1.25 million?

Martha is going to receive $6,000 in two years from Tom. She will receive an additional $4,000 in three years from Tom. She earns 7.15% on her investments. How much is this money from Tom worth To Martha today?

The present value interest factor is calculated as:

The Smith Co. has $450,000 to invest at 5.5% interest. How much more money will they have if they invest these funds for eight years instead of ﬁve years?

What is the future value of $4,160 invested for eight years at 8.5% compounded annually?

Thirty years ago, your father invested $11,000. Today, that investment is worth $287,047. What is the average annual rate of return your father earned on his investment?

Your grandmother invested one lump sum 42 years ago at 3.5% interest. Today, she gave you the proceeds of that investment which totaled $28,204.37. How much did your grandmother originally Invest?

Thirty years ago, your father invested $6,000. Today that investment is worth $67,270.98. What is the average rate of return your father earned on this investment?

Today, your grandmother gave you a gift of $25,000 to help pay for your college education. She told you that this amount was the result of a one-time investment at 8% interest 13 years ago. How Much did your grandmother originally invest?

You deposit $3,000 in a retirement account today at 5.5% interest. How much more money will you have if you leave the money invested for forty-ﬁve years rather than forty years?

You own a classic automobile that is currently valued at $39,500. If the value increases by 6% annually, how much will the auto be worth ten years from now?

You deposit $500,000 in a higher risk investment. Three years later, you receive $711,900 and withdraw your funds. Given this information calculate the interest earned at the end of year 3.

The Blackwell Co. expects to receive $135,000 from an insurance settlement four years from now. If the company can earn 11% on its investments, what is the value of the insurance settlement worth Today?

One year ago, you invested $2,500. Today it is worth $2,789.50. What rate of interest did you earn?

You deposit $1,000 in a retirement account today at 8.5% interest. How much more money will you have if you leave the money invested for 40 years rather than 35 years?

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

Gretchen Enterprises borrowed $149,500 for two years from the bank. At the end of the two years, they repaid the loan with one payment of $176,590. What was the interest rate on the loan?

Omar has an investment valued at $12,345 today. He made a one-time investment at 6.5% four years ago. Leon has an investment that is also valued at $12,345 today. Leon invested four years Ago at 7.5%. Omar originally invested _____ and Leon invested _____.

Tropical Tans is saving money to build a new salon. Three years ago, they set aside $12,000 for this purpose. Today, that account is worth $16,418. What rate of interest is Tropical Tans earning on this Money?

The future value interest factor is calculated as:

Lakeside Inc. invested $735,000 at an 11.25% rate of return. The company sold their investment for $1,067,425. How much longer would Lakeside have had to wait if they had wanted to sell their Investment for $1.25 million?

Martha is going to receive $6,000 in two years from Tom. She will receive an additional $4,000 in three years from Tom. She earns 7.15% on her investments. How much is this money from Tom worth To Martha today?

The present value interest factor is calculated as:

The Smith Co. has $450,000 to invest at 5.5% interest. How much more money will they have if they invest these funds for eight years instead of ﬁve years?

What is the future value of $4,160 invested for eight years at 8.5% compounded annually?

Thirty years ago, your father invested $11,000. Today, that investment is worth $287,047. What is the average annual rate of return your father earned on his investment?

Your grandmother invested one lump sum 42 years ago at 3.5% interest. Today, she gave you the proceeds of that investment which totaled $28,204.37. How much did your grandmother originally Invest?

Thirty years ago, your father invested $6,000. Today that investment is worth $67,270.98. What is the average rate of return your father earned on this investment?

Today, your grandmother gave you a gift of $25,000 to help pay for your college education. She told you that this amount was the result of a one-time investment at 8% interest 13 years ago. How Much did your grandmother originally invest?

You deposit $3,000 in a retirement account today at 5.5% interest. How much more money will you have if you leave the money invested for forty-ﬁve years rather than forty years?

You own a classic automobile that is currently valued at $39,500. If the value increases by 6% annually, how much will the auto be worth ten years from now?

You deposit $500,000 in a higher risk investment. Three years later, you receive $711,900 and withdraw your funds. Given this information calculate the interest earned at the end of year 3.

The Blackwell Co. expects to receive $135,000 from an insurance settlement four years from now. If the company can earn 11% on its investments, what is the value of the insurance settlement worth Today?

One year ago, you invested $2,500. Today it is worth $2,789.50. What rate of interest did you earn?

You deposit $1,000 in a retirement account today at 8.5% interest. How much more money will you have if you leave the money invested for 40 years rather than 35 years?

Omar has an investment valued at $12,345 today. He made a one-time investment at 6.5% four years ago. Leon has an investment that is also valued at $12,345 today. Leon invested four years Ago at 7.5%. Omar originally invested _ and Leon invested _.