{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

TVM Review

# TVM Review - PROBLEM SET#1 Name Date 1 Fresh out of college...

This preview shows pages 1–3. Sign up to view the full content.

PROBLEM SET #1 Name: __________________________ Date: _____________ 1. Fresh out of college, you are negotiating with your prospective new employer. They offer you a signing bonus of \$1,000,000 today or a lump sum payment of \$1,250,000 three years from now. If you can earn 7% on your invested funds, which of the following is true? A) Take the signing bonus because it has the lower present value. B) Take the signing bonus because it has the higher future value. C) Take the lump sum because it has the higher present value. D) Take the lump sum because it has the lower future value. E) Based on these numbers, you are indifferent between the two. 2. You received a \$1 savings account earning 6% on your 1st birthday. How much will you have in the account on your 30th birthday if you don't withdraw any money before then? A) \$3.56 B) \$4.90 C) \$5.42 D) \$5.90 E) \$6.13 3. What is the future value of \$15,000 received today if it is invested at 7.5% compounded annually for five years? A) \$15,133.35 B) \$17,476.42 C) \$21,534.44 D) \$24,521.75 E) \$28,374.89 4. How much would you have to invest today at 9% compounded annually to have \$35,000 available for the purchase of a car five years from now? A) \$20,267.26 B) \$22,747.60 C) \$24,147.25 D) \$26,370.10 E) \$28,149.57 Page 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
5. You will receive a \$250,000 inheritance in 25 years. You can invest that money today at 8% compounded annually. What is the present value of your inheritance? A) \$ 17,491.53 B) \$ 29,767.15 C) \$ 36,504.48 D) \$ 65,492.34 E) \$100,000.00 6. You just won the lottery and want to put some money away for your child's college education. College will cost \$75,000 in 15 years. You can earn 7% compounded annually. How much do you need to invest today?
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern