Chapter Questions
How is the future value related to the present value of a single sum?
How is the present value of a single sum related to the present value of an annuity?
Why does money have a time value?
Does inflation have anything to do with making a dollar today worth more than a dollar tomorrow?
Adjust the annual formula for a future value of a single amount at 12 percent for 10 years to a semiannual compounding formula. What are the interest factors (FV $\mathrm{FF}_{I F}$ ) before and after? Why are they different?
If, as an investor, you had a choice of daily, monthly, or quarterly compounding, which would you choose? Why?
What is a deferred annuity?
List five different financial applications of the time value of money.