The following questions are on the concepts and takeaways learned in the modules on the Time Value of Money and Applications of FV and PV. Most do not have numbers associated with them, however you can come up with your own to fit the situation if you have to. 1. Mary, Gary, Sherry and Larry were given the same sum of money to invest five years ago. Annual interest rates for each have been the same over those five years, however today Larry has the most money, Sherry the second most, Mary the third most and Gary the least. Given this, which has had interest compounded annually, semiannually, quarterly or monthly? 2. Flo, Moe, Joe and Ro are planning to get the same amount ten years from now from an investment made today, with interest being the same for all four. But not all have invested the same amount; the order, from smallest to largest, is Ro, Flo, Joe and Moe. Rank each person, from least to most, in terms of how often interest on their investment is to be compounded each year over the next ten years. 3. Is this a correct statement? The reason Chet today has to pay more than Rhett for an investment that will return them the same amount at the same time in the future when the interest rate is the same is that Chet’s investment has interest compounded more frequently than Rhett.
The following questions are on the concepts and takeaways learned in the modules on the Time
Value of Money and Applications of FV and PV. Most do not have numbers associated with
them, however you can come up with your own to fit the situation if you have to.
1. Mary, Gary, Sherry and Larry were given the same sum of money to invest five
years ago. Annual interest rates for each have been the same over those five years, however
today Larry has the most money, Sherry the second most, Mary the third most and Gary the
least. Given this, which has had interest compounded annually, semiannually, quarterly or
monthly?
2. Flo, Moe, Joe and Ro are planning to get the same amount ten years from now
from an investment made today, with interest being the same for all four. But not all have
invested the same amount; the order, from smallest to largest, is Ro, Flo, Joe and Moe. Rank
each person, from least to most, in terms of how often interest on their investment is to be
compounded each year over the next ten years.
3. Is this a correct statement? The reason Chet today has to pay more than Rhett for
an investment that will return them the same amount at the same time in the future when the
interest rate is the same is that Chet’s investment has interest compounded more frequently
than Rhett.
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