ISyE3025_Spring09_HW1

ISyE3025_Spring09_HW1 - ISyE 3025, Spring09, HW1 This...

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1 of 2 ISyE 3025, Spring09, HW1 This homework is intended for Learning Cycle #1, 1. In 1948 your grandfather left your mother a $5,000 U.S. government bond, to be used for your education. The annual interest rate was 1.9%. The annual interest was left to accumulate with the bond according to compound interest. Then your mother redeemed (cashed in) the bond. What were the cash proceeds many years later, in 2004? 2. You wish to join a club that has an initiation fee of $40,000. You only have $23,000 available for this right now. You can invest in a fund that pays 3.5% per year. If you invest your money in this fund, how many years must you wait until it will grow to the required amount for the initiation fee? [Assume the initiation fee does not change, due to inflation or other reasons] 3. A certain investment is available that promises to return $7,000 five years from now. If the investor's "time value of money" is 4.5% per year, find the equivalent present value of this proposed investment. 4. You expect to receive a future amount at the end of year 200Y. However, you wish instead to receive this amount earlier, at the end of year 200X, with years shown in the table. At the annual interest rate shown in the table, what is the equivalent amount at the end of Year 200X? Future amount Year 200Y Annual interest rate Year 200X $ 2,000 2008 6% 2005 5. You are presented with two investment opportunities, A and B as described below. A choice of either one would require the initial investment now (if you select either investment opportunity, you cannot invest less or more in that opportunity, only the amount shown). In addition, you can
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ISyE3025_Spring09_HW1 - ISyE 3025, Spring09, HW1 This...

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