“Content Blurbs”
As a ghostwriter for a new finance textbook, you are asked to create several
“content blurbs” that will be used on the books website to explain the time
value of money. Hence, you need to respond to the following questions:
1.
What is the relationship between discounting and compounding?
2. a.
What will $5,000 invested for 10 years at 8 percent compounded annually
grow to?
b.
How many years will it take $400 to grow to $1,671, if it is invested at
10 percent compounded annually?
c.
At what rate would $1,000 have to be invested to grow to $4,046 in 10
years?
3.
Calculate the future sum of $1,000, given that it will be held in the bank
for five years and earn 10 percent compounded semiannually.
4.
What is an annuity due? How does this differ from an ordinary annuity?
5.
What is the present value of an ordinary annuity of $1,000 per year for seven
years discounted back to the present at 10 percent? What would be the present
value if it were an annuity due?
6.
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 Fall '11
 JimBrau
 Finance, Time Value Of Money, $5,000, $100,000, $1,671, $4,046

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