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Time Value of Money

2. The present value of a single sum of $100 to be received in 10 years and discounted at a annual 12% rate on a semi-annual basis is:

a. $32.19
b. $31.18
c. $100
d. $310.58
3. The best way to compare two sums to be received at different times in the future is to compute:

a. The present value of each sum.
b. The future value of each sum
c. Compare each sum directly without regard to compound interest
d. None of these

4. Which factor would you use when computing the present value of a series of rent payments, assuming the rent is paid at the beginning of each period as in a standard lease:

a. PVIFA(periods, rate)
b. FVIFA(periods, rate)
c. PVIFA(periods, rate) x (1+rate)
d. PVIF(periods, rate)

Solution Preview

2. The present value of a single sum of $100 to be received in 10 years and discounted at a annual 12% rate on a semi-annual basis is:

a. $32.19
b. $31.18
c. $100
d. $310.58

Answer: b. $31.18

PVIF(20 periods, 6% rate per ...

Solution Summary

Answers to 3 multiple choice questions on Time Value of Money:
1) present value of a single sum
2) comparing two sums to be received at different times in the future
3) factor to use when computing the present value of a series of rent payments

$2.19