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Finance 300
Homework # 4 – Time Value of Money
Name__________________________________
1. Future Value of a Single Cash Flow or Lump Sum
KFed needs your financial advice. He just got a $100,000 divorce settlement and would
like to invest it. You tell him that he should put his money into a Certificate of Deposit
(CD) that pays 10% interest per year. Thus, How much should KFed obtain at the end of
year 5?
2. Present Value of a Single Cash Flow or Lump Sum
Beavis is your best friend. He was recently offered an investment that would pay him
$2,000 at the end of year 4. The interest rate quoted was 9% per year. What should be the
most Beavis should pay for this investment, in other words, what is the present value of
this investment?
After you figured out the PV of this investment, Beavis tells you that the price of this
investment is $3,500. Do you recommend that he buys this investment? Explain (Note :
you don’t need calculations here)
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View Full Document 3. Finding Interest
Napoleon has been planning a hunting trip to Africa for years.
Five years from today, he
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This note was uploaded on 12/16/2009 for the course FIN 300 taught by Professor Olander during the Spring '08 term at ASU.
 Spring '08
 Olander
 Finance, Time Value Of Money, Future Value

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