Time Value of Money Handout

# Time Value of Money Handout - Time Value of Money FVN =...

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Time Value of Money: FV N = PV N (1+i) N FV N = Money to be received N periods from today, the FUTURE VALUE of PV N PV N = The PRESENT VALUE of FV N N = Number of periods separating PV N and FV N i = Period (compound) rate of interest

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You deposit \$1,000 into a savings account which promises 6 percent interest, compounded annually. In 10 years, your account will grow to _____ dollars. b)1,600,00 c) 1,790.85 c)1,689.26 d) 1,824.67
You purchase a bond which promises to pay par or face value of \$10,000 twenty (20) years from today. You paid \$4,895.00 for this bond. Your expected annual interest return on this bond is ______ percent per year. a) 2.52 c) 4.44 b) 3.64 d) 6.08

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You and your spouse are blessed with a new baby girl. Thinking ahead, you wonder “How much money would I need to set aside today so that I will have \$100,000 in her college fund 18 years from today?” Your bank is currently offering 6.25 percent APR on savings account balances. Given this rate, you need to deposit _________ dollars into such an account. b)33,579.88 c) 58,727.66 c)45,244.77 d) 63,456.44
Suppose you can earn 10 percent per year on

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