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Chapter 3:   The Time Value of Money

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1. Finding the present value is simply the reverse of compounding.

2. The present value interest factor (PVIF) is the reciprocal of the future value interest factor (FVIF).

3. If the discount rate decreases, the present value of a given future amount decreases.

4. The present value interest factor for a dollar on hand today is 0.

5. If you would like to double your money in 8 years, the approximate compound annual return you need is 9 percent (Rule of 72).

6. A saving account at Bank A pays 6 percent interest, compounded annually. Bank B's savings account pays 6 percent compounded semiannually. Bank B is paying twice as much interest.

7. All other things being equal, I'd rather have $1,000 today than to receive $1,000 in 10 years.

8. For a given nominal interest rate, the more numerous the compounding periods, the less the effective annual interest rate.

9. If money has a time value, then the future value will always be more than the original amount invested.

10. All other things remaining the same, an annuity received at the beginning of each period has more present value than does one received at the end of each period.

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