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- “List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive” ?
- “How are the present value and future value related” ?
- “How are present values affected by changes in interest rates” ?
- “How much would be in your savings account in eight years after depositing $150 today, if the bank pays 7 percent per year” ? Recalculate the savings account balance, using a 6 percent interest rate, and again, using an 8 percent interest rate.
- “A deposit of $350 earns the following interest rates: (a) 8 percent in the first year, (b) 7 percent in the second year, and (c) 5 percent in the third year. What would be the third year future value” ?
- “Compute the present value of a $850 payment made in 10 years when the discount rate is 12 percent” . Recalculate the present value, using an 11-percent discount rate, and again, using a 13-percent discount rate.
- “What annual rate of return is earned on a $5,000 investment when it grows to $9,500 in five years”? Recalculate the rate of return, assuming the growth occurred in four years, and again, assuming the growth occurred in six years.
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