10. Time Value of Money

Which of the following represents the basic present value equation?

Which of the following is true for calculating the present value of multiple cash flows?

Which formula moves a cash flow of \$800 ahead six years in time at an interest rate of 5\%?

The time value of money considers which of the following item(s) that change the value of money over time?

Which term refers to the increase in an amount of money as a result of interest earned over time?

Charlie invests \$5,000 in an account that earns 6\% annual interest, compounded annually. Which of the following amounts is closest to the value of Charlie’s investment after 40 years?

When interest is earned not only on the principal but also on previously earned interest, it is referred to as:

The nominal interest rate minus the rate of inflation equals which of the following?

Which of the following statements is true regarding the Accounting Rate of Return (ARR) and the time value of money?

What annual rate of return is earned on a \$1 investment that grows to \$1.21 in 2 years, compounded annually?

What is the present value of the following cash flow stream at a rate of 6.25\%?\newline\begin{align*}\text{Year 1:} &\quad \$1,000 \\\text{Year 2:} &\quad \$1,500 \\\text{Year 3:} &\quad \$2,000 \end{align*}\text{(Round your answer to the nearest dollar.)}

Which formula illustrates the value of \$100 invested for one year at 5 percent interest?

Which of the following formulas represents a present value factor?

Why is simple interest useful for planning parts of your financial future?

What would be the future value of \$150 after eight years if you earn 12\% interest per year, compounded annually?