# TVM 1

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```					                             BA 229 – Personal Finance

Time Value of Money

1.   You have decided it is time to buy a new car. You feel you can afford to pay \$500
each month toward a car payment. You have learned that the going rate for car
loans is 7%. Now you want to figure out how much of loan you can afford. Which
formula would you use to calculate this value?
a. PV = FV x IF
b. FV = PV x IF
c. PVA = PMT x IF
d. FVA = PMT x IF

2.   Johnson Electronics is looking for a silent partner to invest in their firm. They are
willing to sign a promissory note guaranteeing a 5% return after five years. Which
formula should I use if I want \$500,000 at that time, and want to know how much I
must invest today?
a. PV = FV x IF
b. FV = PV x IF
c. PVA = PMT x IF
d. FVA = PMT x IF

3.   The first of January 2002 I want to start a Christmas Club account at my credit
union to start saving for next Christmas. They are offering a 3.5% interest rate,
compounded monthly. I want to know how much I will have in December 2002 if I
put \$100 in the account every month. Which formula should I use?
a. PV = FV x IF
b. FV = PV x IF
c. PVA = PMT x IF
d. FVA = PMT x IF

4.   Using the scenario in #3 above, if I only want to put in a lump deposit of \$500 in
January, with no monthly deposits, which formula would I use to determine the
balance in the account in December 2002?
a. PV = FV x IF
b. FV = PV x IF
c. PVA = PMT x IF
d. FVA = PMT x IF

PV = FV x 1 / (1 + i)n
FV = PV x (1 + i)n
PVA = PMT x [1 – (1 / (1 + i)n)] / i
FVA = PMT x [(1 + i)n – 1] / i

```
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 views: 4 posted: 4/18/2012 language: English pages: 1