Present and Future Value: Calculating the Time Value of Money

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

How much will Bill and Mary need to put in the bank today at 4% interest to have $20,000 in five years for a down payment on a house?

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1. If Martha puts $100 in the bank today at 6%, how much will she have in three years?

2. Which of these is an annuity?

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About This Quiz & Worksheet

What is time value of money, and how is it calculated? The questions in this quiz and worksheet combo will assess your understanding of this economic principle and the equations involved in calculating it.

Quiz & Worksheet Goals

Prepare to answer questions on the following:

  • What the time value of money teaches us
  • Definition of present value and how to calculate it
  • What a bond is
  • Relationship between interest rates and bond prices and what happens when rates go up

Skills Practiced

  • Problem solving - use acquired knowledge to solve a practice problem involving calculating present value
  • Defining key concepts - make sure you can accurately define terms such as bond, present value and interest rate
  • Knowledge application - use your knowledge to answer questions about the characteristics of a bond

Additional Learning

Dive in to the lesson titled Present and Future Value: Calculating the Time Value of Money to learn more about this concept. You'll pursue objectives such as the following:

  • Explore a sample scenario involving a lottery winner
  • Define future value
  • Compare and contrast the present value and future value equations
  • Recognize how the saying 'a bird in the hand is worth two in the bush' is related to time value of money
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