Time Value of Money KEY

Time Value of Money KEY - TIME VALUE OF MONEY KEY 1. If...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
TIME VALUE OF MONEY KEY 1. If Leslie wanted to go to her college reunion in 6 years and feels she needs to have $5,000 to make the trip, how much would she need to save annually if she could earn 5% after taxes? FV Annuity 6 years @ 5% = 6.8019 $5,000 ÷ 6.8019 = $735 annual savings 2. This is your lucky year! You have won the lottery and will be paid $10,000/year for the next 10 years. Assuming you could earn 6% after taxes on you investments, how much are your lottery winnings worth today? PV Annuity 10 years @ 6% = 7.3601 $10,000 X 7.3601 = $73,601 3. If the current cost of a college education is $12,000/year and the rate inflation for college costs is 6% after taxes per year, how much will one year of college cost in 10 years? FV Lump Sum 10 years @ 6% = 1.7908 $12,000 X 1.7908 = $21,490 OR PV Lump Sum 10 Years @ 6% = 0.5584 $12,000 ÷ 0.5584 = $21,490
Background image of page 1

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

View Full DocumentRight Arrow Icon
4. Jack (age 45) currently has $75,000 vested in his retirement account. He is planning to contribute $6,000 a year to this account at the end of each year. If the account averages a 9%
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

Time Value of Money KEY - TIME VALUE OF MONEY KEY 1. If...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online