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tvm hw-s

# tvm hw-s - Time Value of Money Problems Use the tables in...

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Time Value of Money Problems Use the tables in Appendix C of the textbook to solve the following problems. 1. If \$2,000 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance in the account at the end of 10 years? 2. If you are able to earn an 8% rate of return, what amount would you need to invest to have \$2,000 one year from now? 3. If \$500, to be received 4 years from now, is discounted at 12%, what is its present value? 4. Suppose you have a winning sweepstake ticket and you are given the option of receiving \$500,000 three years from now, or receiving \$125,000 now, and \$125,000 a year for the next three years, the first occurring one year from now. The sponsor of the prize uses a 6% interest rate. Which option should you select? Show supporting calculations. 5. How much must you deposit in your savings account today in order to have accumulated \$3,000 for a down payment on a new car 5 years from today? The savings account pays interest of 6% compounded annually.

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