1. Which of the following is considered in the time value of money?

• Inflation
• Opportunity cost
• Risk
• All of the above
• None of the above

2 If you are calculating how much you will have in your CD in 5 years after depositing a lump sum of money today, you are:

• Saving
• Compounding
• Discounting
• Analyzing
• None of the above

3 Today you earn a salary of $28,500. What will be your annual salary fifteen years from now if you earn annual raised of 3.5 percent? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

4 You just started your first job today. Besides your 401K, you are planning to save $3,000 a year for 40 years for your retirement when you receive tax returns. If the first deposit is made a year from now into an account with the annual interest rate of 8%, how much will you have in your account in 40 years? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

5 Your parents are giving you $100 a month for four years while you are in college. At a 6 percent discount rate, what are these payments worth to you when you start college? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

6 You are starting your four-year college education today, and you are worried if you have enough money in your account for tuition and fees. You are going to pay $15,000 a year at the beginning of each school year starting today. If the interest rate on your account is 7%, compounded annually, how much should you have in your account today? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

7 How much would an investor be willing to pay for an investment which promises to pay $200 per year in perpetuity if the investor requires a 14 percent return on the investment? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

8 If you are going to receive $70,000 for 20 years starting 5 years from now, what is the present value of the cash flows discounted at 12%? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

9 You decided to save all of tax refunds next four years. Given your projection of your annual income and effective tax rate, you believe that you will be able to invest $3,000, $3,300, $3,800, and $4,000 next four years, respectively, starting a year from today. Your estimated rate of return on this investment is 5%. How much can you withdraw in 4 years? Round to the nearest cent. Do not include any unit (If your answer is $111.11, then type 111.11 without $ sign.)

10 What is the effective annual yield of 6% compounded monthly? Answer in the percent format. Round to the nearest hundredth percent. Do not include any unity (If your answer is 4.36%, then enter 4.36 as your answer without % sign).