End of Chapter 18 Questions and Answers

End of Chapter 18 Questions and Answers - End of Chapter 18...

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End of Chapter 18 Questions and Answers 1. What is the present value of an offer of $15,000 one year from now if the opportunity cost of capital (discount rate) is 12% per year simple interest? Answer: 15000/1.12 = $13,393 2. What is the present value of an offer of $14,000 one year from now if the opportunity cost of capital (discount rate) is 11% per year simple interest? Answer: 14000/1.11=$12,613.3 3. What is the present value of an offer of $15,000 two years from now if the opportunity cost of capital (discount rate) is 12% per year compounded annually? Answer: 15000/1.12 2 = $11,958 4. What is the present value of an offer of $14,000 two years from now if the opportunity cost of capital (discount rate) is 11% per year compounded annually? Answer: 14,000/1.11 2 = $11,362.7 5. What is the future value of $20,000 that grows at an annual interest rate of 12% per year for two years? Answer: 20000*1.12 2 = $25,088 6. What is the future value of $25,000 which grows at an annual interest rate of 11% per year for two years? Answer: 25000*1.11 2 = $30,802.5 7. What is the present value of an offer of $15,000 one year from now if the opportunity cost of capital (discount rate) is 12% per year nominal annual rate compounded monthly? Answer: 15000/((1+(.12/12)) 12 )=15000/1.01 12 =15000/1.126825 = $13,312 8. What is the present value of an offer of $14,000 one year from now if the opportunity cost of capital (discount rate) is 11% per year nominal annual rate compounded monthly? Answer: 14000/((1+(.11/12))
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End of Chapter 18 Questions and Answers - End of Chapter 18...

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