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The Time Value of Money

Simple and compound interest; present value concept; and TVM.

1. Can you explain the difference between "simple" and "compound" interest? Please provide some of the uses of compound interest in business. I also need to know the effects of using compound interest when evaluating future value transactions and calculations. 2. What is "present value"? What is an example of the "present

Important Information about Personal Income Tax

David and Eliza are married and under 65 years of age. During 2004, they furnish more than half of the support of their 18-year old son, Timothy. Timothy earns $4,000 from a part-time job, most of which he sets aside for future college expenses. During 2004, they also furnish more than half of the support of their 25-year old

Diversity at Nestle

You feel that as NL&C grows, the employee base will grow increasingly diverse. With the mindset of doing things right the first time, you plan to present a diversity strategy which emulates the best practices of other companies. You've hear that Nestle is a standard-setter. A friend of yours in HR sends you to the Diversity

Compounding value


Time value of money

Someone spends $60/acre to plant trees on marginal land. The expected rate of return is 4% and inflation is expected to be 6%. What is the expected value of the timber after 20 years. How would you calculate this using a financial calculator?

Time value of money: retirement plans

Ted Gardiner has just turned 30 years old. He has currently accumulated $35,000 toward his planned retirement at age 60. He wants to accumulate enough money over the next 30 years to provide for a 20-year retirement annuity of $100,000 at the beginning of each year, starting with his 60th birthday. He plans to save $5,000 at t

Time Value of Money

You are currently 30 years of age. You intend to retire at age 60 and you want to be able to receive a 20-year, $100,000 beginning-of-year annuity with the first payment to be received on your 60th birthday. You would like to save enough money over the next 15 years to achieve your objective; that is, you want to accumulate th

Time value

You invest $1,000 today and expect to sell your investment for $2,000 in 10 years. a. Is this a good deal if the discount rate is 6%? b. What if the discount rate is 10%? Show your solutions.

Time value of money: Present value, future value, deposits, bonds, compounding

Please provide detailed explanations and step by step processes for understanding the problems. Problem 2-2 Use equations and a financial calculator to find the following values. a) An initial $500.00 compounded for 10 years at 6 percent. b) An initial $500.00 for 10 years at 12 percent. c) The present value of $500.0

Time value of money

1.A salesperson tells you that you can buy the car you are looking at for $3000 down and $200 a month for 48 months. If interest is 14% compounded monthly: a)What is the selling price car? b)How much interest will you pay during the 48 months? 2.A man deposits $2000 in an IRA on his 21st birthday and on each subseque

Time value of money

1. How long will it take double if invested at 12% compounded monthly? 2. Colortime Rent To Own sells a compact disk stereo for $3,000. You pay one third down and amortize the rest with equal payments over a 2 year period. If you are charged 1.5% interest per month on the unpaid balance. a) What is your monthly payment?

What are some key components of Time Value of Money?

What are some key components of Time Value of Money and how it related to: Commercial Banks, Insurance companies, State Governments - Lotteries, Retirement plan financial service providers, Credit card financial service companies?

The Required Rate of Return and Discounting Perpetuity

1) Given an interest rate of 10% per year, what is the value at the end of year 5 of a perpetual stream of $120 annual payments starting at the end of year 9? 2) Theoretical decision to release a new revision of a book: Company estimates the new revision will cost $40,000. Cash flows from increased sales will be $10,000 in t

Multiple Choice Questions on Time Value of Money and Rate of Return

2. Present Value What is the present value of: 1. $9,000 in 7 years at 8 percent? 2. $20,000 in 5 years at 10 percent? 3. $10,000 in 25 years at 6 percent? 4. $1,000 in 50 years at 16 percent? 3. Future Value If you invest $9,000 today, how much will you have: a. In 2 years at 9 percent? b. In 7 years

Time value of money

Find the following values, using equations. Disregard rounding the differences. A) an initial $500 compounded for 1 yr at 6% B) an initial $500 compounded for 2 yrs at 6% C) The present value of $500 due in 1 yr at a discount rate of 6% D) The present value of $500 due in 2 years at a discounted rate of 6% E) An initial

Baby boomer hits retirement age in year 2011

Baby boomer hits retirement age in year 2011, what types of information would assist in forecasting market potential and future demand for products and services of this emerging maturity market?

Time Value of Money in Investments

Problem #1 Smolinski company is considering an investment which will return a lump sum of $5000,000 five years from now. What amount should simolinski company pay for this investment to earn a 15% return. Problem #2 Kilarny company is considering investing in an annuity cintract that will return $20,000.00 annually at the e

Computing mean time

The following historical time between failure and repair time for a certain punch press is available. The machine was installed in the month of June after an appropriate burn-in period. The first breakdown happened on August 5, after 221 hours of use. (see chart in attached file) Date 8/5 11/6 12/19 2/7 3/30 # of hrs of

Present value problem

What is the present value today of your projected monthly retirement check of $2,000 (your estimate which you will receive when you reach 65)? You turn 65 in 25 years and you think inflation will be 6 percent a year between now and your retirement.

Time required to pay off a Car loan

I want to buy a car. I can get a loan for $6,000.00 at a 12% interest rate. I can afford $230.00 a month for payments. How long will it take me to pay off the loan.

Jane is a finance major at a university...

Jane is a finance major at a university and has a $600 overdue debt for books and supplies at the bookstore. She has only $200 in her checking account and doesn't want her father to know about this debt. The manager at the bookstore tells her that she may settle the account in one of two ways since she cannot pay it all now.

Explain concept

23. Annuities and Interest Rates. Professor's Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $80,000 at age 65, the firm will pay the retiring professor $600 a month until death. a. If the professor's remaining life expectancy is 20 years, what is the monthly rate on this annuity? What is

Compounding of Interest,Present & Future Value of Investment

Explain how annuities affect TVM problems and investment outcomes with the impact of the following items listed below - this does not have to be exstensively long a. Interest Rates and Compounding b. Present Value (of a future payment received) c. Future Value (of an investment) d. Opportunity cost e.