Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 3, Problem 6CC
Is the value today of money to be received in one year higher when interest rates are high or wheninterestrates are low?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Which of the following changes would
increase the present value of a future
payment? (check all that apply)
Decrease in the number of years
until the future payment is received
Increase in the interest rate
Increase in the amount of the
payment
Decrease in the interest rate
Increase in the number of years
until the future payment is received
Which of the following statements about the time value of money is true?
a.) A dollar in hand today is worth less than a dollar to be received in the future.
b. ) The value of a dollar invested at a positive interest rate decreases over time.
c.) The further in the future you receive a dollar, the less it is worth today.
d.)The higher the rate of interest, the more likely an investor will elect to consume at present and forgo invest his funds.
The time value of money takes all of the following into consideration EXCEPT
a.Inflation
b.the number of compounding periods per year
c.The total number of years
d. the present value of money
Chapter 3 Solutions
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Ch. 3 - Prob. 1CCCh. 3 - If crude oil trades in a competitive market, would...Ch. 3 - How do investor's profit motives keep competitive...Ch. 3 - How do we determine whether a decision increases...Ch. 3 - How is an interest rate like a price?Ch. 3 - Is the value today of money to be received in one...Ch. 3 - Prob. 7CCCh. 3 - Prob. 8CCCh. 3 - What makes an investment decision a good one?Ch. 3 - How important are our personal preferences in...
Ch. 3 - Why are market prices useful to a financial...Ch. 3 - Why is arbitrage important to competitive market...Ch. 3 - Prob. 5CTCh. 3 - Can we directly compare dollar amounts received at...Ch. 3 - Prob. 7CTCh. 3 - What is a discount rate?Ch. 3 - What is compound interest?Ch. 3 - What is the intuition behind the geometric growth...Ch. 3 - Honda Motor Company is considering offering a...Ch. 3 - Prob. 2PCh. 3 - Prob. 3PCh. 3 - Prob. 4PCh. 3 - Prob. 5PCh. 3 - Prob. 6PCh. 3 - Bubba is a shrimp farmer. In an ironic twist,...Ch. 3 - Brett has almond orchards, but he is sick of...Ch. 3 - You have $100 and a bank is offering 5% interest...Ch. 3 - Prob. 10PCh. 3 - A friend asks to borrow $55 from you and in return...Ch. 3 - Prob. 12PCh. 3 - Prob. 13PCh. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Prob. 16PCh. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Prob. 21PCh. 3 - Prob. 22PCh. 3 - 26. Your cousin is currently 12 years old. She...Ch. 3 - Prob. 24PCh. 3 - 29. You are planning to invest $5000 in an account...Ch. 3 - Prob. 26P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Why is the capital gains yield simply the interest rate minus the current yield? Isn't capital gains yield usually something like (ending value - beginning value) / beginning value? If the question was to calculate capital gains yield for the 3rd year, would that be solved differently?arrow_forwardIf the discounting rate decreases and the no of years increases what will be the impact on future value and present value?arrow_forward1. How is the future value related to the present value of a single sum? 2. How is the present value of a single sum related to the present value of an annuity? 3. Why does money have a time value? 4. Does inflation have anything to do with making a dollar today worth more than a dollar tomorrow? 5. What is a deferred annuity?arrow_forward
- a. Complete an amortization schedule for a $21,000 loan to be repaid in equal installments at the end of each of the next three years. The interest rate is 7% compounded annually. Round all answers to the nearest cent. Beginning Repayment Ending Year Balance Рayment Interest of Principal Balance 1 $ $ $ $ $ $ $ $ $ 3 2$ $ $ $ b. What percentage of the payment represents interest and what percentage represents principal for each of the three years? Round all answers to two decimal places. % Interest % Principal Year 1: % % Year 2: % % Year 3: % % %24 %24arrow_forwardwhich of the following statements are correct given a constant interest rate and constant giver year period of time? 1) An increase in the future values causes the present value to declines 2) An increase in the future value cause the present value to increase 3) There is inverse relationship between the present value and future value 4) There is a direct relationship between the present value and the future value a) 2 and 3 only b) 2 and 4 only c) 1 and 3 only d) 1 and 4 only e) 1 onlyarrow_forwardQ1. (a) What effect does compounding interest more frequently than annually have on: (i) future value and (ii) the effective annual rate (EAR)? Why? Differentiate between a nominal annual rate and an effective annual rate (EAR).arrow_forward
- Will doubling the interest rate on an investment cut the time it takes to earn the same amount of interest in half? Could you provide an example?arrow_forwardvalue of a future payment change as the un to recelpt is lengthened? As the interest rate increases? What's the difference between an ordinary annuity and an annuity due? Why would you prefer to receive an annuity due for $10,000 per year for 10 years than an otherwise similar ordinary annuity? iii.arrow_forwardThe future value of a single sum A. is generally larger than the present sum. B. decreases as the number of periods increases. C. does not depend upon the number of periods. D. decreases as the interest rate increases.arrow_forward
- 2 Given a set of present value tables, an annual interest rate, the dollar amount of equal payments made, and the number of semiannual payments, what other information is necessary to calculate the present value of the series of payments? A. The future value of the annuity. B. The timing of the payments (whether they are at the beginning or end of the period). C. The rate of inflation. D. No other information is required.arrow_forwardHow much has to be put away today to provide some dollar amount in the future?arrow_forward(TRUE or FALSE?) The PV of the ordinary annuity is larger than the PV of the annuity due because the cash flows of the annuity due are shifted forward one year and thus are discounted more.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
What Does ROI (Return On Investment) Really Mean?; Author: REtipster;https://www.youtube.com/watch?v=Z6ThJvNr1Dw;License: Standard Youtube License