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Time-value of money

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Chapter 1

1. A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships.

2. Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government.

3. Financial services are concerned with the duties of the financial manager.

4. Financial managers actively manage the financial affairs of many types of business-financial and non-financial, private and public, for-profit and not-for-profit.

5. In partnerships, owners have unlimited liability and may have to cover debts of other less financially sound partners.

6. In partnerships, a partner can readily transfer his/her wealth to other partners.

7. The board of directors is responsible for managing day-to-day operations and carrying out the policies established by the chief executive officer.

Chapter 4
8. Since individuals are always confronted with opportunities to earn positive rates of return on their funds, the timing of cash flows does not have any significant economic consequences.

9. Time-value of money is based on the belief that a dollar that will be received at some future date is worth more than a dollar today.

10. Future value is the value of a future amount at the present time, found by applying compound interest over a specified period of time.

11. Interest earned on a given deposit that has become part of the principal at the end of a specified period is called compound interest.

12. The future value interest factor is the future value of $1 per period compounded at i percent for n periods.

13. For a given interest rate, the future value of $100 increases with the passage of time. Thus, the longer the period of time, the greater the future value.

14. The greater the potential return on an investment and the longer the period of time, the higher the present value.

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Solution Preview

Chapter 1

1. A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships.

True
http://www.baesystems.com/Careers/CareersinYourCountry/US/LeadershipDevelopment/FinanceLeadershipDevelopment/AboutUs/RotationExample/FinancialAnalyst/index.

2. Finance is concerned with the process institutions, markets, and instruments involved in the transfer of money among and between individuals, businesses and government.

True

3. Financial services are concerned with the duties of the financial manager.

False
These are concerned with providing value to ...

Solution Summary

Response discusses the time-value of money

$2.19
Similar Posting

Time Value Money, Rate of return,

1. U have been tracking a non-dividend paying share that you purchased. Its price since you purchased it (t = 0) until today (t = 3) has been P0 = $27.50, P1 = $17.50, P2 = $31.50 and P3 = $26.50.

a) Compute the periodic rates of return.

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2. With an 8% annual interest rate, how long does it take a sum of money to double given
a) annual compounding,
b) semi-annual compounding and
c) daily compounding?

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4. Some day, you will buy an Acura NSX, drive it for 10 years and sell it for more than you paid for it. If you pay $89,000 for it and your expected rate of return is 6%, how much must you sell it for?

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