Time Value of Money Problems
1.
If you deposit $10,000 in a bank account that pays 10% interest annually, how
much money will be in your account after 5 years?
2.
What is the present value of a security that promises to pay you $5,000 in 20
years?
Assume that you would earn 7% if you were to invest in securities of
equal risk.
3.
What is the future value of a 5 year annuity due that promises to pay you $300
each year?
Assume that all payments are reinvested at 7% a year until year 5.
4.
John has $42,180.33 in a brokerage account, and he plans to contribute an
additional $5,000 to the account at the end of every year.
The brokerage account
has an expected annual return of 12%.
If John’s goal is to accumulate $250,000
in the account, how many years will it take to reach his goal?
5.
An investment pays you $100 at the end of each of the next 3 years.
The
investment will then pay you $200 at the end of year 4, $300 at the end of year 5
and $500 at the end of year 6.
If the interest rate earned on the investment is 8%,
what is its present value?
What is its future value?
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 Spring '08
 WHITE
 Finance, Time Value Of Money, Interest, Net Present Value, bank account

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