Time Value Of Money Essay

661 words - 3 pages

Question 1

0.5 out of 0.5 points

Suppose a U.S. treasury bond will pay $2,500 five years from now. If the going interest rate on 5-year treasury bonds is 4.25%, how much is the bond worth today?
Answer

Selected Answer:

b. $2,030.30

Correct Answer:

b. $2,030.30


Question 2

0.5 out of 0.5 points

You have a chance to buy an annuity that pays $2,500 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity?
Answer

Selected Answer:

e. $6,744.83

Correct ...view middle of the document...

5 out of 0.5 points

How much would $100, growing at 5% per year, be worth after 75 years?
Answer

Selected Answer:

b. $3,883.27

Correct Answer:

b. $3,883.27


Question 7

0.5 out of 0.5 points

Last year Rocco Corporation's sales were $225 million. If sales grow at 6% per year, how large (in millions) will they be 5 years later?
Answer

Selected Answer:

c. $301.10

Correct Answer:

c. $301.10


Question 8

0.5 out of 0.5 points

Sue now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
Answer

Selected Answer:

d. $240.08

Correct Answer:

d. $240.08


Question 9

0.5 out of 0.5 points

You want to buy a new sports car 3 years from now, and you plan to save $4,200 per year, beginning one year from today. You will deposit your savings in an account that pays 5.2%...

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