Finding a present value is the reverse of finding a future value Is the process of calculating the present value of a cash flow or a series of cash flows to be received in the future, Which of the following investments that pey will $17,500 in 8 years will have a lower price today? The security that carns an interest rate of 6.00% The security that earns an interest rate of 4.00% Eric wants to invest in government securities that promise to pay $1,000 at maturity. The opportunity cost interest rate) of holding the security is 5.40%. Assuming that both Investments have equal risk and Eric's investment time horizon is flexible, which of the following investment options will exhibit the lower price? An investment that matures in five years An Investment that matures in four years Which of the following is true about present value calculations? Other things remaining equal, the present value of a futute cash flow decreases if the investment time period increases Other things remaining equal, the present value of a future cash flow increases if the investment time period increases. The future value and present value equations also help in finding the interest rate and the number of years that correspond to present and future value calculations. Ir a security currently worth $9,200 will be worth $15,767 18 seven years in the future, what is the implied interest rate the investor will eam on the security-assuming that no additional deposits or withdrawals are made? 0.24% O 1.71% 6.40% 8.00% for this investment to reach li an investment of $50,000 is earning an interest rate of 8,00%, compounded annually, then it will take a value of $89,052.92-assuming that no addition deposits or withdrawals are made during this time Which of the following statements is true-assuming that no additional deposits or withdrawals are made? If you invest $5 today at 15% annual compound Interest for 82 3753 years, you'll end up with $100,000 If you invest $1 today at 15% annual compound interest for 82.3753 years, you'll end up with $100,000 Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share expected sales and revenues in the future, and so forth. Consider the following case: Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen, Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939 Germany was a growing market for Coca-Cola, along with other countries in Europe, belote World War II. with the previous data given, calculate the company's sales growth rate for each time period in the following table: Growth Rate Years 1934-1936 1936-1939 1934-1939 (Source: "Coca-Cola GmbH and World War Two," www.gettherealfacts.co uk/doc/omb.pdf) During World War 11, Coca-Cola Co. cut off all syrup sales to Germany in 1940, resulting in no sales from 1943 to 1945. If Coca-Cola's sales had grown from 1939 to 1945 at the same rate that they grew between 1934 and 1939, its sales in 1945 would have been approximately cases. (Hint: Use sales data from 1939 as the present value.) Coca-Cola's worldwide sales as of December 31, 2011, was 26.7 billion cases. Assume the following sales distribution: Unit Case Volume Eastern Europe 20% Germany 16% 149 12% Spain Great Britain Italy France 9% 8% Other 219 If Coca-Cola's worldwide growth were to continue at the same growth rate as it did in Germany between 1939 and 2008, when sales grew at the rate of 10.26%, its hypothetical sales in Eastern Europe in 2053 (42 years from 2011) would be approximately billion cases. (Note: For this question, Ignore other factors that affect sales) There are two categories of cash flows: single cash flows, referred to as "lump sums, and annuities. Based on your understanding of annuities, answer the following questions, Which of the following statements about annuities are true? Check all that apply An annuity is a series of equal payments made at fixed intervals for a specified number of periods. An annuity due carns more interest than an ordinary annuity of equal time Ordinary annuities make fixed payments at the beginning of each period for a certain time period. An annuity due is an annuity that makes a payment at the beginning of each period for a certain time period. Which of the following is an example of an annuity? A lump-sum payment made to a life insurance company that promises to make a series of equal payments later for some period of time An investment in a certificate of deposit (CD) Luana loves shopping for dothes, but considering the state of the economy, she has decided to start saving. At the end of each year, she will deposit $710 in her local bank, which pays her 4% annual interest. Loona decides that she will continue to do this for the next five year. Cuane's songs are an example of an annuity. How much will she save by the end of five years? $3,990.41 $3,160.79 53,845.59 $3,268.75 by the end of the It Etana deposits the money at the beginning of every year and everything else remains the same, she will save years