FIN-200 FA4 Study Guide - Midterm Guide: Loan, Mississaugas Of The New Credit First Nation, Bankrate

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amethystgrasshopper785

10 Dec 2018

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Annuities and they do not continue forever. An annuity is a series of constant payments that occur at regular intervals. The first payment occurs next period, not now. If payments go on forever they are called perpetuity. Annuity example you want to buy a car by saving ,000 per year, rather than depositing the entire amount (present value) now. This is the more common way to save for a large purchase or for retirement. not many of have the present value of our retirement needs right now! ,000,000 at your retirement in 50 years (at 3% interest), deposit. Annuity timeline the constant cashflow of a 3 year annuity of per year at 10% What interest rate am i getting? (i/y) Present value and future value of an annuity. Find present value or future value of an annuity. *the unused variable of either fv or pv should be imputed as 0.

Related Questions

Question 1 5 pts

0 multiple_choice_question 22046808

The internal rate of return (IRR) is the interest rate that sets the net present value of the future cash flows equal to ________.

Question 2 5 pts

On a timeline, the space between date 0 and date 1 represents the _______ between dates. Letâs assume it is the first year of the loan. Date 0 is the beginning of the first year, and date 1 is the end of the first year.

Question 3 5 pts

As the interest rate __________, present value decreases.

Question 4 5 pts

The present value (PV) of a stream of cash flows is the _______ the present values of each individual cash flow

Question 5 5 pts

When a constant cash flow will occur at regular intervals for a finite number of periods of time, it is called a(n) __________.

Question 6 5 pts

Edit this Question Delete this Question

0 multiple_choice_question 22047052

There are two basic types of annuities:

Discounted and compounded annuities

Ordinary annuities and annuities due.

Future value and present value annuities

None of the above

Question 7 5 pts

The NPV measures the ______ change in shareholder wealth that arises from undertaking a project.

Question 8 5 pts

The Net Present Value rule implies that we should compare a projectâs net present value (NPV) to ________

Question 9 5 pts

To endow a perpetuity is the same as calculating the present value (PV) of a perpetuity. Say you want to endow an annual graduation party at your alma mater. You want the event to be a memorable one, so you budget $30,000 per year forever for the party. If the university earns 8% per year on its investments, and if the first party is in one yearâs time, how much will you need to donate to endow the party?

The formula for PV of a perpetuity = C\r; = $30,000 \ 0.08; =

Question 10 5 pts

With an Ordinary Annuity, payments are required at the ________ of each period. An example of this is bonds which usually pay coupon payments at the end of every six months until the bond's maturity date.

beginning

middle

end

payments are not required

limemacaw827

Can you please indicate the correct answers from my quiz. If you give the answers I can figure out what I did wrong.

Which one of the following statements is correct?
Select one:
a. The present value of an annuity increases when the interest rate decreases.
b. The future value of an annuity is unaffected by the amount of each annuity
payment.
c. The future value of an annuity increases when the interest rate decreases.
d. The present value of an annuity is unaffected by the number of the annuity
payments.
e. The present value of an annuity increases when the interest rate increases

Augusta Acres is planning a major expansion for 3 years from today. In preparation
for this, the company is setting aside $30,000 each quarter, starting today, for the
next 3 years. How much money will the firm have when it is ready to expand if it
can earn an average of 7.5 percent on its savings?
Select one:
a. $594,165
b. $486,152
c. $407,038
d. $552,712
e. $399,546

financed this purchase at 8.25 percent interest with monthly payments of
$2,379.45. How many years will it take the firm to pay off this debt?
Select one:
a. 5.0 years
b. 3.5 years
c. 4.5 years
d. 3.0 years
e. 4.0

You are comparing two investments, both of which provide annuity payments in
exchange for a lump sum investment today. Each annuity is for a period of 25
years and each pays $500 a month. You require a 7 percent return on these
investments. Annuity A pays at the beginning of each month and annuity B pays at
the end of each month. Given this information, which one of the following
statements is correct?
Select one:
a. Annuity B is worth more today because of the timing of its cash flows.
b. Both annuities are equally valuable today.
c. Annuity A has a higher present value and a lower future value than annuity
B.
d. Annuity A has both a higher present value and a higher future value than
annuity B.
e. Annuity A is worth more today because you will receive 25 payments
whereas Annuity B only pays 24 payments.

The Corner Bank pays 4 percent interest, compounded monthly, on its savings
accounts. The Uptown Bank pays 4 percent interest, compounded quarterly, on its
savings accounts. You want to deposit sufficient funds today so that you will have
$2,400 in your account 3 years from today. The amount you must deposit today:
Select one:
a. will be greater if you invest with The Corner Bank.
b. is the same regardless of which bank you choose because they both pay 4
percent interest.
c. is the same regardless of which bank you choose because they both pay
compound interest.
d. will be greater if you invest with The Uptown Bank.
e. is the same regardless of which bank you choose because they both pay
simple interest.

The Mailbox Co. invested $50,000 at 7.5 percent compounded annually for 2
years. How much interest on interest did the company earn over this period of
time?
Select one:
a. $3,750.00
b. $4,614.83
c. $281.25
d. $7,781.25
e. $7,500.00

erinalligator919

Present Value of an Annuity

Find the present value of the following ordinary annuities. Round your answers to the nearest cent. (Notes: If you are using a financial calculator, you can enter the known values and then press the appropriate key to find the unknown variable. Then, without clearing the TVM register, you can "override" the variable that changes by simply entering a new value for it and then pressing the key for the unknown variable to obtain the second answer. This procedure can be used in many situations, to see how changes in input variables affect the output variable. Also, note that you can leave values in the TVM register, switch to Begin Mode, press FV, and find the FV of the annuity due.)

$600 per year for 10 years at 14%.
$

$300 per year for 5 years at 7%.
$

$600 per year for 5 years at 0%.
$

Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due.

$600 per year for 10 years at 14%.
$

$300 per year for 5 years at 7%.
$

$600 per year for 5 years at 0%.
$

orangecamel253

FIN-200 FA4 Study Guide - Midterm Guide: Loan, Mississaugas Of The New Credit First Nation, Bankrate

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