Principals of Finance chapter 9
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46 Terms
If all other factors remain the same, an increase in the number of periods will______ the future value of an investment
Increase
Which of the following statements are true concerning the time value of money(TVM)
Money received today is worth more than money received in the future.
An increase in the number of periods will____ the present value of a single sum to be received in the future.
Decrease
Formula represents a present value Fator
1/(1+r)^t
The future value of an amount is directly proportional to the interest rates.
true
The assumption for time value of money calculations is that ____ interest is used unless ststed otherwise
Compound
Which of the following factor affects the calculation of present value?
Dollar amount of each payment, Number of periods, Interest rate
The present value of money received today is ____ the same amount of money that will be received a year from today.
more than
The basic present value equation is
PV= FVt(1+r)^t
As a rule, the future value of a single sum will be ____its present value
Greater than
The discount rate is the interest rate used to calculate the time value of money
True
The time value of money is the concept that $100 received in the future is not worth as much as $100 received today (the present)
True
The present value formula is
FV/(1+i)^n
An increase in the interest rate will _____
increase the future value, decrease the present value
The future value of an amount is directly proportional to the interest rates
True
The assumption for time value of money calculation is that _____interest is used unless stated otherwise
Compound
Which of the following statement are true concerning the time value of money (TVM)
Money received today is worth more than money received in the future
The present value of money received today is ____ the same amount of money that will be received a year from today
more than
A decrease in the interest rate____ the present value of a single sum to be received in the future.
Increase
As a rule, the future value of a single sum will be ____ its present value.
greater than
The financial calculator does not require us to use the___ function
Log
An annuity is defined as
A series of equal payment s at regular intervals
Present value refers to___
The amount that must be invested today to realize a specific amount in the future.
True regarding an ordinary annuity
An ordinary annuity is a series of equal payment occurring at the end of the period at equal intervals
An increase in the interest rate will ___
Decrease the present value, Increase the future value
For an annuity, if all other factors remain the same, an increase in the number of periods_____ the future value
Increase
An increase in the number of periods will____ the present value of a single sum
decrease
An increase in the discount rate would ____ the present value of an annuity
Decrease
An annuity factor is
the term used to compute the present value of the stream of payment
An ordinary annuity is defined as____.
an annuity in which the payments are made at the end of each payment interval.
Many investments require a series of ____- which makes understanding the present value of a(n)____ important.
Payments, annuity
The future value of an annuity of $1000 will be ____ the future value value of a single sum of $1000.
more than
To calculate the discount rate in a present value problem i excel, the formul used is ____ (nper,pmt,pv,fv)
RATE
Present value tables provide conversion factors to convert
future values to present values
The present value of an annuity is the value today of a series of equal payment to be received in the future
True
Expressed in graphical form, the line showing the future value will___ if the number of periods increase
Increase
Assuming the same rate of return, the graphic presentation of the present value and future value are directly related to each other.
False
The present value of an annuity is the value
now of a series of equal amount to be received or paid in the future
Present value tables provide
conversion factors to convert future values to present values
Expresses in graphical form, the bars showing the present value will___ if the number of periods increase
decrease
When calculating the present value of an annuity using the financial calculator, you enter the cash flows of the annuity using the PMT key
true
In order to present time value relationships in graphical form one must know:
Present value and future value
Many investments require a series of _____ which makes understanding the present value of a(n)______ important
Payment, annuity
Amortization is the
process of paying off an installment loan in a series of equal payments consisting of both principal and interest.
Time value of money be a factor when considering an investment in or sale of an asset
Investment in a pension plan, Dividends to be received from the investment, A buy vs. lease decision for an asset
Working out the implied interest rate on an annuity allows you to compare whether the annuity is a good investment
True