Activity 6 - Time Value of Money

What does the concept of "future value" represent in finance?

• The value of an investment at the current time

• The value of an investment at a specific date in the future

• The amount of money borrowed

• The interest rate charged on a loan

If you invest \$1,000 at an annual interest rate of 5% compounded annually for 3 years, what is the future value?

• \$1,150.00

• \$1,157.63

• \$1,200.00

• \$1,050.00

What does "present value" mean in the context of finance?

• The value of a future sum of money in today's terms

• The value of an investment after interest is applied

• The amount of money in a savings account

• The total interest earned over time

If you need \$2,000 in 5 years and the annual discount rate is 4%, what is the present value you must invest today?

• \$1,644.61

• \$1,800.00

• \$2,200.00

• \$1,500.00

An annuity is best described as:

• A single payment made at a future date

• A series of equal payments made at regular intervals

• A one-time investment

• A payment made only at the end of a period

Which of the following is an example of an ordinary annuity?

• Monthly rent payments made at the beginning of each month

• Monthly car loan payments made at the end of each month

• A lump sum payment at the end of 5 years

• A single dividend payment

The present value of an ordinary annuity can be calculated using which formula?

A perpetuity is:

• A series of payments that continues forever

• A single payment made at a future date

• A loan that is repaid in equal instalments

• A bond that matures in 10 years