Present Value
Complete the following, solving for the present value, PV: FV = $10,000; Interest Rate = 5%; # of Periods = 5
$7,835.26
DOUBLE RAAC POINTS! What does TVM stand for?
Time Value of Money
Suppose ABC ltd is analyzing a project which requires investment of $200,000 and it is expected to generate cash flows as follows. What is the Payback Period?
$200,000 - $80,000 = $120,000 (YEAR 1)
$120,000 - 60,000 = $60,000 (YEAR 2)
$60,000 - $60,000 = $0 (YEAR 3) Payback Period = 3 years
DOUBLE RAAC POINTS! When investing, this is a share of ownership in a business.
Stock
What is your Finance teacher's name?
Mrs. Rachna Patel
DOUBLE RAAC POINTS! Complete the following, solving for the present value, PV: FV = $563,000; Interest Rate = 4%; # of Periods =20
$256,945.85
How many years will it take to double your investment of $1,000, given an annual return rate of 5.8%?
-1000 PV 2000 FV 5.8 I/Y CPT N N=12.294
DOUBLE RAAC POINTS! What is the Rule of 72 used for?
To get a rough estimate of how long it will take to double your money.
What is a company's stock abbreviation called?
Ticker symbol
DOUBLE RAAC POINTS! Mr. Smith has 4 daughters. Each of his daughters has a brother. How many children does Mr. Smith have?
5; all of the daughters have the same 1 brother.
Complete the following, solving for the present value, PV: FV = $5,000; Interest Rate = 5.5%; # of Periods =3
$4,258.07
DOUBLE RAAC POINTS! Initial Investment (II) = $7,500, TPP = 3 years, Required Rate of Return = 8%, Calculate the Payback Period
PP = 2 + [7,500 - (2,000 + 4,000)] / 3,000 = 2.5 years
How long does Bankruptcy stay on your credit report?
7 Years
DOUBLE RAAC POINTS! How does Dividend work?
A cash payment from profits distributed among stockholders. You make money every time company makes money.
DOUBLE RAAC POINTS! What # do you get when you multiply all of the numbers on a telephone's number pad?
0
Suppose you want to have $0.5 million saved by the time you reach age 30 and suppose that you are 20 years old today. If you can earn 5% on your funds, how much would you have to invest today to reach your goal?
Given: FV = $500,000; i = 5%; n = 10
PV = $500,000 (1 / (1 + 0.05)10) = $500,000 (0.6139)
= $306,959.63
An investment of $200,000 is expected to generate the following cash inflows in six years. Compute Payback Period of the Investment. Yr 1: $70,000 Yr 2: $60,000 Yr 3: $55,000 Yr 4: $40,000 Yr 5: $30,000 Yr 6: $25,000
PP = 3 + [200,000 - (70,000 + 60,000 + 55,000)]/40,000 = 3.375 years
Company XYZ’s target payback period is 3 years. It is projected that it will take 3 years and 5 months to make all of the company’s initial investment back. Should the company accept or reject the project?
Reject, because it is over the expected 3-year Payback period.
Why would I consider going to Yahoo Finance before investing in a stock?
There are several books on a bookshelf. If one book is the 4th from the left and 6th from the right, how many books are on the shelf?
9 (easier if you sketch the problem out on paper)!
Suppose I want to be able to withdraw $5,000 at the end of five years and withdraw $6,000 at the end of six years, leaving a zero balance in the account after the last withdrawal. If I can earn 5% on my balances, how much must I deposit today to satisfy my withdrawals needs? (There are two different future values).
FV = $5,000; n = 5, i = 5% PV = $3,917.63
FV = $6,000; n = 6, i = 5% PV = $4,477.29
PV of the two FV's = $3,917.63 + 4,477.29 = $8,394.92
FV - Future Value, PV - Present Value, PMT - Payment, I/R - Interest Rate, N - Number of Periods
Name at least three companies' ticker symbols.
Answers may vary: AAPL, MSFT, TSLA, etc.
When filling out the Balance sheet of all expenses and profits, there was a Credit side. Name the other side. For DOUBLE RAAC POINTS, state which side deducts amounts from the balance.
Debit; Debit amounts are deducted.
As I was walking to Starbucks, I met Nathan with 7 friends; Each friend had 7 sacks; Each sack had 7 cats; Each cat had 7 kittens: Kittens, cats, sacks, & friends. How many were going to Starbucks?
1; I was the only person that is assumed to be going to Starbucks :)