Sample Questions on Time Value of Money (TVM)

Sample Questions on Time Value of Money (TVM)

 Question 1

$100 to be received at the end of 3 years is worth how much today, assuming a discount rate of 
a)10 per cent 
b)100 per cent 
c)0 per cent?

Question 2
At the end of 5 years, how much is an initial $500 deposit plus annual $100 payments worth, assuming an annual interest rate of 
a)10 per cent 
b)5 per cent 
c)0 per cent?

Question 3
What is the present value of $500 to be received at the end of each of the next 3 years, assuming a discount rate of 
a)4 per cent 
b)25 per cent

Question 4

If Miss Smith is offered the choice of:
a)     $628.06 now;  or
a)     $50 per quarter for four years at 12% per annum compounded quarterly;  or
b)     $1007.85 at the end of four years;
which alternative should you recommend that she accept?