10. Time Value of Money

According to the Rule of 72, you can do which one of the following?

Suppose you deposit \$5,000 into a savings account that earns 6\% annual interest, compounded annually. What is the total balance in the account after 40 years?

What is the present value of a \$300 annuity payment received annually for 5 years if the interest rate is 8\% per year? (Assume payments are made at the end of each year.)

What is the total interest due at maturity on a \$1,500, 12\% annual interest rate, 120-day note? (Assume a 360-day year and simple interest.)

If Janet refinances her loan to a lower interest rate but extends the repayment period, what would be the impact on the total interest Janet would have paid over the life of the loan?

Which of the following is true when interest rates rise?

Which term refers to the current value of future cash flows discounted at the appropriate discount rate?

Which term refers to the earning potential of money over time?

At an annual interest rate of 12.5\%, how many years will it take for an investment to triple in value if interest is compounded annually?

All else constant, which one of the following will result in the lowest present value of a lump sum?

Which term refers to the payment made for the use of borrowed money?

The variables in a present value of an annuity problem include all of the following, except:

In the Excel PMT function, which argument corresponds to the interest rate per period?

Which one of the following will decrease the present value of an annuity?

2. Why does the amount of interest you pay on a loan typically decrease every month when making regular payments?