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tvmpracticeset1

tvmpracticeset1 - TVM Practice Problems I 1 You are...

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TVM Practice Problems I 1. You are planning to purchase a house four years from now, and you will need $12,000 for a down payment at that time. Suppose you can earn 4.5% per year in a money market fund. How much do you need to deposit into the fund today, in a single deposit, in order to have $12,000 at the end of four years? 2. Over a four-month period in the second half of 2001, the monthly changes in the price of Eli Lilly common stock were as follows: +4.0% in August, –5.2% in September, +8.5% in October and –5.0% in November. If you had invested $100 in Lilly stock at the beginning of August, what would your investment be worth at the end of November? 3. Your broker calls you with a recommendation to purchase a stock which she says will double in value in four years. a. What annual rate of return does this represent? b. If the stock actually produced an annual rate of return of 12.5%, how long would it take your original investment to double in value?
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