Quantitative Methods - TVM

An investment of €500,000 today that grows to €800,000 after six years has a

stated annual interest rate closest to:

• 7.5% compounded continuously.

• 7.7% compounded daily.

• 8.0% compounded semiannually.

A sweepstakes winner may select either a perpetuity of £2,000 a month beginning

with the first payment in one month or an immediate lump sum payment

of £350,000. If the annual discount rate is 6% compounded monthly, the present

value of the perpetuity is:

• less than the lump sum.

• equal to the lump sum.

• greater than the lump sum.

At a 5% interest rate per year compounded annually, the present value (PV) of a

10-year ordinary annuity with annual payments of $2,000 is $15,443.47. The PV

of a 10-year annuity due with the same interest rate and payments is closest to:

• $14,708.

• $16,216.

• $17,443.

A saver deposits the following amounts in an account paying a stated annual rate of 4%, compounded semiannually:

Year 1 = $4,000

Year 2 = $8,000

Year 3 = $7,000

Year 4 = $10,000

At the end of Year 4, the value of the account is closest to:

• $30,432

• $30,447

• $31,677

A client requires £100,000 one year from now. If the stated annual rate is 2.50%

compounded weekly, the deposit needed today is closest to:

• £97,500.

• £97,532.

• £97,561.

A bank quotes a stated annual interest rate of 4.00%. If that rate is equal to an

effective annual rate of 4.08%, then the bank is compounding interest:

• daily.

• quarterly.

• semiannually.

For a lump sum investment of ¥250,000 invested at a stated annual rate of

3% compounded daily, the number of months needed to grow the sum to

¥1,000,000 is closest to:

• 555.

• 563.

• 576.

An investment pays €300 annually for five years, with the first payment occurring

today. The present value (PV) of the investment discounted at a 4% annual

rate is closest to:

• €1,336.

• €1,389.

• €1,625.

The present value (PV) of an investment with the following year-end cash flows

(CF) and a 12% required annual rate of return is closest to:

Year 1 = $100,000

Year 2 = $150,000

Year 5 = -$10,000

• $201,747.

• $203,191.

• $227,573.

A sports car, purchased for £200,000, is financed for five years at an annual

rate of 6% compounded monthly. If the first payment is due in one month, the

monthly payment is closest to:

• £3,847.

• £3,867.

• £3,957.