Reference no: EM132817990

1. 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? Why?

2. How are the present value and future value related?

3.Would you prefer to have an investment earning 5 percent for 40 years or an investment earning 10 percent for 20 years? Explain

4.How are present value affected by changes in interest rates?

5.What do you think about the following statement?" I am going to receive $100 two years from now and $200 three years from now,so I am getting a $300 future value" How could the two cash flows be compared or combined?

6.Show how the Rule of 72 can be used to approximate the number of yearsto quadruplean investment.

7Without making any computation, indicate which of each pair has a higher interest rate:

a. $100 doubles to$200 in five years or seven years

b.$500 increases in four years to $750 or $800

c.$300 increases to $450 in to years or increases to $500 in three years.

8.$1000 investment has doubled to $2000 in eight years because of a 9percent rate of return. How much longer will it take for the investment to reach$4000 if it continues to earn a 9 percent rate?