FINANCIAL MNGMT

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THIS IS ALL ONE QUESTION , JUST WITH A LOT OF PHOTOS S YOU CAN SEE DROP BOX. THX!!

Ch 05: Assignment - Time Value of Money Back to Assignment Attempts Average/7 3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. This process requires knowledge of the values of three of The process for converting present values into future values is called four time-value-of-money variables. Which of the following is not one of these variables? O The inflation rate indicating the change in average prices The duration of the investment (N) O The interest rate (I) that could be earned by invested funds The present value (PV) of the amount invested All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 8%, or 16%. Identify the interest rate that corresponds with each line. VALUE (Dollars! B C 0 1 2 3 4 5 6 7 8 9 10 TIME Years) This process requires knowledge e values is called llowing is not ong les? discounting average prices compounding by invested funds corresponds with each line. VALUE (Dollars) B C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: 16% Investmer Joans base their interest calculations on one of two possible methods: the interest and the 0% interest methods. Both methods apply three variables-the amount of principal, the interest rate, and period-to ount deposited or invested in order to compute the amount of interest. However, the two methods differ in 8% the variabl Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the a invested, respectively. Which equation best represents the calculation of a future value (FV) using: corresponds with each line. VALUE (Dollars) B 0 1 2 3 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: 0% Investments and loans base terest calculations on one of two possible methods: the interest and inter 3% hods. Both methods apply three variables-the amount of principal, the interest rat period-to the amount depd invested in order to compute the amount of interest. However, the two methods the variables. 16% Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of invested, respectively. Which equation best represents the calculation of a future value (FV) using: VALUE (Dollars) B C 0 1 2 3 4 5 5 6 7 8 9 10 TIME Years] Line A: Line B: Line C 0% Investments and loans base their interest cal s on one of two possible methods: the interest and the interest methods. Both 3% As apply three variables-the amount of principal, the interest rate, and period-to the amount deposited or invested to compute the amount of interest. However, the two methods differ in the variables. 16% Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the ar invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? FV = PV / (1 + 1) OFV = PV + (PV x I X N) OFV = PV x (1 + I)N VALUE (Dollars) B C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: Investments and loans base their interest calculations on one of two possible methods: the interest and the interest methods. Both methods apply three variables-the amount the interest rate, and the investment or deposit period-to the amount deposited or invested in order to compute the amount of interest. He complex two methods differ in their relationship between the variables. simple Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? OFV = PV / (1 + 1)N O FV = PV + (PV XIX N) 0 E - RYUIN . C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: Investments and loans base their interest calculations on one of two possible methods: the interest and the interest methods. Both methods apply three variables-the amount of principal, the interest rate, and the investment or deposit period-to the amount ted in order to compute the amount of interest. However, the two methods differ in their relationship between the variables. uncomplicated compound ariables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or investco, Tespectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? OFV = PV / (1 + I)N OFV = PV + (PV x I x N) OFV = PV x (1 + I)N Simple interest? Compound interest? OFV = PV / (1 + 1)N OFV = PV + (PV x I X N) O FV = PV x (1 + I) Simple interest? OFV = PV / (PV XI X N) OFV = PV + (PV XI X N) OFV = PV x IxN Identify whether the following statements about the simple and compound interest methods are true or false. Statement True False The process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods. O O After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. O 0 All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year. Nicholai is willing to invest $30,000 for six years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year investment period, complete the following table and indicate whether Nicholai should invest in each of the investments. Note: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar. Investment Interest Rate and Method Expected Future Value Make this investment? A 8% simple interest B $ 3% compound interest 5% compound interest S whole dollar No Make Yes estment? A Investment Interest Rate and Method Expected Future Value 8% simple interest 3% compound interest 5% compound interest B C Ch 05: Assignment - Time Value of Money Back to Assignment Attempts Average/7 3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. This process requires knowledge of the values of three of The process for converting present values into future values is called four time-value-of-money variables. Which of the following is not one of these variables? O The inflation rate indicating the change in average prices The duration of the investment (N) O The interest rate (I) that could be earned by invested funds The present value (PV) of the amount invested All other things being equal, the numerical difference between a present and a future value corresponds to the amount of interest earned during the deposit or investment period. Each line on the following graph corresponds to an interest rate: 0%, 8%, or 16%. Identify the interest rate that corresponds with each line. VALUE (Dollars! B C 0 1 2 3 4 5 6 7 8 9 10 TIME Years) This process requires knowledge e values is called llowing is not ong les? discounting average prices compounding by invested funds corresponds with each line. VALUE (Dollars) B C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: 16% Investmer Joans base their interest calculations on one of two possible methods: the interest and the 0% interest methods. Both methods apply three variables-the amount of principal, the interest rate, and period-to ount deposited or invested in order to compute the amount of interest. However, the two methods differ in 8% the variabl Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the a invested, respectively. Which equation best represents the calculation of a future value (FV) using: corresponds with each line. VALUE (Dollars) B 0 1 2 3 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: 0% Investments and loans base terest calculations on one of two possible methods: the interest and inter 3% hods. Both methods apply three variables-the amount of principal, the interest rat period-to the amount depd invested in order to compute the amount of interest. However, the two methods the variables. 16% Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of invested, respectively. Which equation best represents the calculation of a future value (FV) using: VALUE (Dollars) B C 0 1 2 3 4 5 5 6 7 8 9 10 TIME Years] Line A: Line B: Line C 0% Investments and loans base their interest cal s on one of two possible methods: the interest and the interest methods. Both 3% As apply three variables-the amount of principal, the interest rate, and period-to the amount deposited or invested to compute the amount of interest. However, the two methods differ in the variables. 16% Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the ar invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? FV = PV / (1 + 1) OFV = PV + (PV x I X N) OFV = PV x (1 + I)N VALUE (Dollars) B C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: Investments and loans base their interest calculations on one of two possible methods: the interest and the interest methods. Both methods apply three variables-the amount the interest rate, and the investment or deposit period-to the amount deposited or invested in order to compute the amount of interest. He complex two methods differ in their relationship between the variables. simple Assume that the variables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or invested, respectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? OFV = PV / (1 + 1)N O FV = PV + (PV XIX N) 0 E - RYUIN . C 0 1 2 3 4 5 6 7 8 9 10 TIME (Years) Line A: Line B: Line C: Investments and loans base their interest calculations on one of two possible methods: the interest and the interest methods. Both methods apply three variables-the amount of principal, the interest rate, and the investment or deposit period-to the amount ted in order to compute the amount of interest. However, the two methods differ in their relationship between the variables. uncomplicated compound ariables I, N, and PV represent the interest rate, investment or deposit period, and present value of the amount deposited or investco, Tespectively. Which equation best represents the calculation of a future value (FV) using: Compound interest? OFV = PV / (1 + I)N OFV = PV + (PV x I x N) OFV = PV x (1 + I)N Simple interest? Compound interest? OFV = PV / (1 + 1)N OFV = PV + (PV x I X N) O FV = PV x (1 + I) Simple interest? OFV = PV / (PV XI X N) OFV = PV + (PV XI X N) OFV = PV x IxN Identify whether the following statements about the simple and compound interest methods are true or false. Statement True False The process of earning compound interest allows a depositor or investor to earn interest on any interest earned in prior periods. O O After the end of the second year and all other factors remaining equal, a future value based on compound interest will never exceed the future value based on simple interest. O 0 All other factors being equal, both the simple interest and the compound interest methods will accrue the same amount of earned interest by the end of the first year. Nicholai is willing to invest $30,000 for six years, and is an economically rational investor. He has identified three investment alternatives (A, B, and C) that vary in their method of calculating interest and in the annual interest rate offered. Since he can only make one investment during the six-year investment period, complete the following table and indicate whether Nicholai should invest in each of the investments. Note: When calculating each investment's future value, assume that all interest is earned annually. The final value should be rounded to the nearest whole dollar. Investment Interest Rate and Method Expected Future Value Make this investment? A 8% simple interest B $ 3% compound interest 5% compound interest S whole dollar No Make Yes estment? A Investment Interest Rate and Method Expected Future Value 8% simple interest 3% compound interest 5% compound interest B C