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Extra+exercises+topic+2_+Time+value+of+money+-+TO+BE+DISCUSSED+IN+CLASS

# Extra+exercises+topic+2_+Time+value+of+money+-+TO+BE+DISCUSSED+IN+CLASS

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Topic II. Time value of money – Extra exercises 1 Esther Eiling – MGTB09 Fall 2010

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Exercise 1 Linda takes on a \$7,000 loan to travel around the world. The loan needs to be repaid in four quarterly installments, starting one quarter from now. The annual interest rate, based on semi-annual compounding, is 8%. a) Calculate the quarterly interest rate. b) Calculate the quarterly payment. c) Complete the amortization schedule: Period Begin. Princ. outstanding PMT Interest Principal repayment End. Princ. outstanding 1 2 3 4 2 Esther Eiling – MGTB09 Fall 2010
Exercise 2 What is today’s value of an investment that pays \$2,000 every third year forever with the first cash flow occurring one year from today? The annual

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Extra+exercises+topic+2_+Time+value+of+money+-+TO+BE+DISCUSSED+IN+CLASS

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