FI360-Homework 2-2

# FI360-Homework 2-2 - Foundations of Financial Management...

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Foundations of Financial Management FI360 Homework Assignment 2 “Time Value of Money” 1. You invest \$3,000 for three years at 12 percent. a . What is the value of your investment after one year ? 3360 b . What is the value of your investment after two years? 3762 c . What is the value of your investment after three years? 4215 2. What is the present value of: a . \$9,000 in 7 years at 8 percent? 5247 b . \$20,000 in 5 years at 10 percent? 12420 c . \$10,000 in 25 years at 6 percent? 2330 d . \$1,000 in 50 years at 16 percent? 1\$ 3.Your uncle offers you a choice of \$30,000 in 50 years or \$95 today. If money is discounted at 12 percent, which should you choose? 30,000 is better because the equation PV = \$30,000 × .003 = \$90 Choose \$95 today. 4. You are going to receive \$100,000 in 50 years. What is the difference in present value between using a discount rate of 14 percent versus four percent? Difference is 14, 000 5. How much would you have to invest today to receive: a . \$15,000 in 8 years at 10 percent? 7005

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## This note was uploaded on 02/09/2011 for the course FIN 360 taught by Professor Smith during the Spring '10 term at Park.

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FI360-Homework 2-2 - Foundations of Financial Management...

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