# Time Value of Money: Single Cash Flows - kelvin777 - 78393

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• Due on: Sat 27 Feb, 2016 (07:00pm)
• Asked on: Sun 21 Feb, 2016
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• Question 1:
• Proficient-level: "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?" (Cornett, Adair, and Nofsinger, 2016, p. 95).
• Distinguished-level: State the reason for showing both a negative and positive amount on the time line.
• Question 2:
• Proficient-level: "How are the present value and future value related?" (Cornett, Adair, & Nofsinger, 2016, p. 95).
• Distinguished-level: Explain why a dollar is worth more today than a dollar received a year from now.
• Question 3:
• Proficient-level: "How are present values affected by changes in interest rates?" (Cornett, Adair, & Nofsinger, 2016, p. 95).
• Distinguished-level: Explain how future values are affected by changes in interest rates.
• Question 4:
• Proficient-level: "How much would be in your savings account in 11 years after depositing \$150 today, if the bank pays 7 percent per year?" (Cornett, Adair, & Nofsinger, 2016).
• Recalculate the savings account balance, using a 6 percent interest rate, and again, using an 8 percent interest rate.
• Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in future values.
• Question 5:
• Proficient-level: "A deposit of \$350 earns the following interest rates: (a) 8 percent in the first year, (b) 6 percent in the second year, and (c) 5.5 percent in the third year. What would be the third year future value?" (Cornett, Adair, & Nofsinger, 2016).
• Distinguished-level: Explain why the future value is not calculated as the average of the annual interest rates.
• Question 6:
• Proficient-level: "Compute the present value of a \$850 payment made in 10 years when the discount rate is 12 percent" (Cornett, Adair, & Nofsinger, 2016, p. 96).
• Recalculate the present value, using an 11-percent discount rate, and again, using a 13-percent discount rate.
• Distinguished-level: Describe the relationship between changes in interest rates and the ensuing changes in present values.
• Question 7:
• Proficient-level: "What annual rate of return is earned on a \$5,000 investment when it grows to \$9,500 in five years?" (Cornett, Adair, & Nofsinger, 2016, p. 97).
• Recalculate the rate of return, assuming the growth occurred in four years, and again, assuming the growth occurred in six years.
• Distinguished-level: Describe the relationship between changes in the amount of time and the changes in annual rate of return.
1 Solution for Time Value of Money: Single Cash Flows - kelvin777
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Time value of money
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