Time Value Practice Problems

# Time Value Practice Problems - BEC1Danny Reid invested...

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BEC-1   Danny Reid invested \$6,000 at 5% annual interest, and left the money invested without  withdrawing any of the interest for 12 years. At the end of the 12 years, Danny withdrew the  accumulated   amount   of   money.   (a)   What   amount   did   Danny   withdraw,   assuming   the  investment earns simple interest? (b) What amount did Danny withdraw, assuming the  investment earns interest compounded annually? a) 6,000*5%*12+6,000= 9,600 b) 6,000* FVF(12,5%)= 6,000*1.79586= 10775.16 BEC-2   For each of the following cases, indicate (a) to what interest rate columns and (b) to what  number of periods you would refer in looking up the future value factor.  1.     Annual Rate Number of Years Invested Compounded Case A 6% 3 Annually Case B 8% 4 Semiannually Interest Rate Number of period Case A 6% 3 Case B 4% 8 2.     Annual Rate Number of Years Invested Compounded Case A 5% 8 Annually Case B 6% 6 Semiannually Interest Rate Number of period Case A 5% 8 Case B 3% 12 BEC-4   Weisman Company issued \$1,000,000, 10-year bonds and agreed to make annual sinking  fund deposits of \$75,000. The deposits are made at the end of each year into an account  1

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paying 5% annual interest. What amount will be in the sinking fund at the end of 10 years? 75,000 * FVF-OA( 10, 5%) = 75,000 * 12.57789 = 943341.75 BEC-6   Kurt Heflin borrowed \$30,000 on July 1, 2010. This amount plus accrued interest at 9%  compounded annually is to be repaid on July 1, 2015. How much will Kurt have to repay on  July 1, 2015? 30,000 * FVF(5, 9%) = 30,000 * 1.53862 = 46158.6
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Time Value Practice Problems - BEC1Danny Reid invested...

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