Chapter 6 Time Value of Money Classroom Problems

Chapter 6 Time Value of Money Classroom Problems - TIME...

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TIME VALUE OF MONEY CLASSROOM PROBLEMS (Chapter 6) 1. (Solve Mathematically) You have a \$1,000 savings account that pays 6% per year. What will be the savings account balance at the end of five years? (Assume that you do not make any withdrawals during this time and that interest is compounded annually) 2. (Solve Mathematically) You have been saving money and managed to accumulate \$1,000. You have decided to invest all of it in your friend's company. Your buddy has promised to pay you 12% annual interest. How much will your friend's company owe you in 5 years? (Assume annual compounding) 3. (Solve Mathematically) Your great Aunt Matilda wants to give you \$5,000 when you graduate from college in 2 years. If she deposits \$4,000 into a money market account that is earning 8% interest per annum, will she meet her goal? (Assume annual compounding) 4. (Solve Mathematically) You will receive \$5,000 at the end of three years from an investment you made. If the interest rate is 10%, how much did you originally invest? (Assume annual compounding)

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5. (Solve Mathematically) If you invest in your former roommate’s company and are hoping to accumulate \$1,700 at the end of five years, how much do you need to invest at 12% today? (Assume annual discounting) 6. (Solve Mathematically) What is your opportunity cost (rate of return) if you decide to invest \$500 in a project that has a termination value of \$10,000 in 20 years? (Assume annual compounding) 7. (Solve Mathematically) If you invest \$5,000 today in a mutual fund that has been averaging a 15%
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Chapter 6 Time Value of Money Classroom Problems - TIME...

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