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. 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? The present value (PV) of the amount invested The duration of the investment (N) The interest rate (I) that could be earned by invested funds The inflation rate indicating the change in average prices . This process requires knowledge of the values of three of
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- 2. 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. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The interest rate (I) that could be earned by deposited funds The trend between the present and future values of an investment The duration of the deposit (N) The present value (PV) of the amount deposited 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%, 9%, or 17%. Identify the interest rate that corresponds…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. 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 present value (PV) of the amount invested O The inflation rate indicating the change in average prices O The duration of the investment (N) O The interest rate (I) that could be earned by invested funds This process requires knowledge of the values of three of 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.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. A. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The inflation rate indicating the change in average prices The duration of the investment (N) The interest rate (I) that could be earned by invested funds The present value (PV) of the amount invested B. 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 deposited or invested in order to compute…
- 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. The process for converting present values into future values is called . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The duration of the investment (N) The inflation rate indicating the change in average prices The present value (PV) of the amount invested The interest rate (I) that could be earned by invested fundsWhich method does not consider the time value of money? Choose the correct. A. Net present value B. Internal Rate of Return C. Average rate of return D. Profitability IndexA centerpiece of any study of finance is "valuation." A simple function, "V=l/R," can be used to describe an asset's "value." What does the "R" in that expression stand for? O a future cash flow O a current cash flow O a market-determined discount rate O a variable income measure O a measure of probability
- Which of the following methods consider the time value of money? A. payback and accounting rate of return B. payback and internal rate of return C. internal rate of return and accounting rate of return D. internal rate of return and net present value. Match each sentence to the correct concept. a) The amount an investment is worth after one or more time periods is referred to as_______________b) The process of finding the present value of some future amount is called_________________.c) Calculating the present value of a future cash flow to determine its value today isknown as _________________.d) Interest earned on the principal and maybe for a number of years may be called______________e) ___________ is the process of accumulating interest in an investment over time toearn more interest.f) The interest earned on both the initial principal and the interest reinvested fromprior periods is referred to as ______ _______.The present value of an investment's future cash flows divided by its initial cost is the: O Net present value. O Internal rate of return. O Average accounting return. O Profitability index. O Payback period.
- 3. Present value Finding a present value is the reverse of finding a future value. Which of the following is true about finding the present value of cash flows? Finding the present value of cash flows tells you how much you need to invest today so that it grows to a given future amount at a specified rate of return. Finding the present value of cash flows tells you what a cash flow will be worth in future years at a specified rate of return. Which of the following investments that pay will $18,500 in 8 years will have a higher price today? The security that earns an interest rate of 8.50%. The security that earns an interest rate of 12.75%. 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 13.80%. Assuming that both investments have equal risk and Eric’s investment time horizon is flexible, which of the following investment options will…Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the Initial Investment? A. internal rate of return (IRR) method B. net present value (N PV) C. discounted cash flow model D. future value method,Match the following terms with the appropriate definition.Effective yield or interest rateMonetary liabilityCompound interestPresent ValueFuture value of a single amountA.Fixed obligation to pay an amount in cash.B.The rate at which money will actually grow.C.Interest accumulates on interest.D.Current worth of future cash flows.E.The money to which an amount invested will grow over time.