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Problem Set #1

# Problem Set #1 - Problem Set#1 Introductory TVM and Ratio...

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Problem Set #1: Introductory TVM and Ratio Analysis 1. Which one of the following is the correct formula for the future value of \$500 invested today at 7 percent interest for 8 years? A. FV = \$500/[(1 + 0.08) × 7] B. FV = \$500/[(1 + 0.07) × 8] C. FV = \$500/(0.07 × 8) D. FV = \$500 (1 + 0.07) 8 E. FV = \$500 (1 + 0.08) 7 2. Terry invested \$2,000 today in an investment that pays 6.5 percent annual interest. Which one of the following statements is correct, assuming all interest is reinvested? 3. Which one of the following will increase the present value of a lump sum future amount? Assume the interest rate is a positive value and all interest is reinvested.

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