# Time Value Problems

## Time Value Problems

﻿1) Your grandmother places \$13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at \$18,233.17. Which of the following statements is correct?
A) The present value is \$13,000, the time period is 7 years, the present value is \$18,233.17, and the interest rate is 5%.
B) The future value is \$13,000, the time period is 5 years, the principal is \$18,233.17, and the interest rate is 7%.
C) The principal is \$13,000, the time period is 5 years, the future value is \$18,233.17, and the interest rate is 7%.
D) The principal is \$13,000, the time period is 7 years, the future value is \$18,233.17, and the interest rate is 5%.
Explanation: C) The \$13,000 is the principal or present value, the interest rate is stated as 7%, the time period is identified as 5 years, and the future value is \$18,233.17.

2) The one-time payment of money at a future date is often called a ________.
A) lump-sum payment
B) present value
C) principal amount
D) perpetuity payment
3) A \$100 deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year.
A) \$100
B) \$120
C) \$121
D) \$122