FNCE 370 - Lesson 3: Time Value of Money

Question 3

You are in the process of budgeting for your university education. You estimate that you will need about $50,000 to go back to university after 3 years. You have already saved $35,000. You want to invest this money for the next 3 years, and then use the future proceeds to finance your university education. What is the minimum annual rate of return you must obtain on your investment to achieve your goal?

Select one:

a. 23.33%

b. 16.72%

c. 12.62%

d. 11.89%

e. 10.00%

Question 6

You invest $50,000 into your portfolio of investments and expect to earn 8% per year for the next 10 years. How much money will you have if you sell these investments at the end of the eighth year?

Select one:

a. $23,159.67

b. $27,013.44

c. $90,000.00

d. $92,546.51

e. $107,946.25

Question 7

A house in Vancouver is currently valued at $1.5 million. If the average annual growth in Vancouver house prices over the last 10 years was 15%, what was the value of the house 10 years ago?

Select one:

a. $606,833.66

b. $370,777.06

c. $225,000.00

d. $211,205.40

e. $130,434.78

Question 8

Peter wants to buy a tablet computer with a cost of $1,200. If Peter has $950 invested today, and the annual interest rate is 6.5%, how long will Peter have to wait before he has enough money to buy the tablet computer?

Select one:

a. 1 year and 3 months

b. 2 years and 6 months

c. 3 years and 1 month

d. 3 years and 7 months

e. 3 years and 9 months

Question 9

The National Bank of Wynona offers two types of savings account. The Top-Up-N-Saver account pays 2.5% annual compound interest, whereas the Super-Saver account pays 3% annual simple interest. If we put in $1,000 now and leave the money in the bank account for 10 years, which account would pay the most interest (and how much more)?

Select one:

a. The Top-Up-N-Saver account would pay $19.92 more in interest.

b. The Top-Up-N-Saver account would pay $50 more in interest.

c. The Super-Saver account would pay $50 more in interest.

d. The Super-Saver account would pay $19.92 more in interest.

e. Both accounts would pay the same interest.

Question 1

All else being equal, the present value of $X in T years at a discount rate of r is

Select one:

a. higher if r is lower.

b. lower if $X is higher.

c. lower if T is smaller.

d. lower if r is lower.

e. higher if T is larger.