1) What is the key concept behind time value of money? 2) If your money doubles...

  

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1) What is the key concept behind time value of money? 2) If your money doubles in 10 years, what is its approximate compound annual growth rate (hint: use the Rule of 72 and round to the nearest percent)? 3) If your money doubles in 5 years, what is its approximate compound annual growth rate (Hint: use the Rule of 72 and round to the nearest percent)? 4) In most cases, will simple interest be greater or less than compound interest? 5) Assuming a positive interest rate, will the present value be greater or less than the future value? 6) Will a longer time period increase or decrease the future value, assuming the same annual interest rate in both cases? 7) Will a higher discount rate increase or decrease the present value? 8) Ann buys a $300,000 house, with 20% down and a 6% annual interest rate and a 30 year mortgage. What are the approximate monthly payments? (Hint: calculate the annual payment and divide by 12) (4 pts) 9) A family spends $28,000 a year for living expenses. If prices increase by 4% a year for the next 3 years, what amount will the family need for their living expenses after 3 years? Please use the formula method. (2 pts) 10) You would like to have $1,000 5 years from now and believe you can earn 6% on your money. How much would you have to deposit today to reach your $1,000 goal? (2 pts) 11) How much would you need to deposit today in order to take out $500 a year for 10 years from an account earning 8% interest? (2 pts) 12) You are age 30. You invest $2000 a year until age 60, when you want to retire. How much will you have at retirement, if you earn 7% per year on your money? (2 pts) 13) You buy a stock for $10 a share and sell it 3 years later for $18 a share. What is the precise (rounded to the nearest 10th of a percent) compound annual growth rate? Please use the CAGR formula method. (2 pts) 1) What is the key concept behind time value of money? 2) If your money doubles in 10 years, what is its approximate compound annual growth rate (hint: use the Rule of 72 and round to the nearest percent)? 3) If your money doubles in 5 years, what is its approximate compound annual growth rate (Hint: use the Rule of 72 and round to the nearest percent)? 4) In most cases, will simple interest be greater or less than compound interest? 5) Assuming a positive interest rate, will the present value be greater or less than the future value? 6) Will a longer time period increase or decrease the future value, assuming the same annual interest rate in both cases? 7) Will a higher discount rate increase or decrease the present value? 8) Ann buys a $300,000 house, with 20% down and a 6% annual interest rate and a 30 year mortgage. What are the approximate monthly payments? (Hint: calculate the annual payment and divide by 12) (4 pts) 9) A family spends $28,000 a year for living expenses. If prices increase by 4% a year for the next 3 years, what amount will the family need for their living expenses after 3 years? Please use the formula method. (2 pts) 10) You would like to have $1,000 5 years from now and believe you can earn 6% on your money. How much would you have to deposit today to reach your $1,000 goal? (2 pts) 11) How much would you need to deposit today in order to take out $500 a year for 10 years from an account earning 8% interest? (2 pts) 12) You are age 30. You invest $2000 a year until age 60, when you want to retire. How much will you have at retirement, if you earn 7% per year on your money? (2 pts) 13) You buy a stock for $10 a share and sell it 3 years later for $18 a share. What is the precise (rounded to the nearest 10th of a percent) compound annual growth rate? Please use the CAGR formula method. (2 pts)

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1 The key concept behind time value of money is that a dollar received today is worth more than a do... View the full answer