Applications of Single-Payment TVM

Reaching a savings goal

Comparing payment options

Inflation and real value

The retirement timing lesson

A firm needs 500,000 dollars in five years and can earn 6 percent on invested funds. What deposit today reaches the goal?

A company must repay 1,000,000 dollars on a bond maturing in ten years. If it earns 5 percent on reserve funds, what must it set aside today to cover the repayment exactly?

A vendor offers 9,500 dollars today or 10,200 dollars in one year. If your cost of capital is 8 percent, which option is cheaper?

A machine costs 100,000 dollars today, and inflation runs 3 percent. Approximately what will the same machine cost in five years?

A firm planning for a machine's replacement in five years faces a 6 percent earnings rate and 3 percent inflation. Which statement uses the rates correctly?

Two savers target 1,000,000 dollars at age sixty five at 8 percent. One deposits at twenty five, leaving forty years, the other waits until thirty five, leaving thirty. Roughly how much more must the late saver deposit?

What is the name of the rate used to escalate a current cost into its expected future price? Answer with one word.

What two-word term names the fund that accumulates today's present value to meet a known future debt repayment? Answer in lowercase.

Converting a future nominal sum into today's purchasing power divides by one plus which rate raised to the number of years? Answer with one word.

What two-word term names the process by which interest earns interest across periods, rewarding the saver who starts early? Answer in lowercase.