FINANCE 301-MODULE-2-CASE

# FINANCE 301-MODULE-2-CASE - FINANCE 301 MODULE 2 CASE...

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FINANCE 301 MODULE 2 CASE ASSIGNMENT DR. STEVEN POLLARD Part I :  This part of the assignments tests your ability to calculate present value. A . Suppose your bank account will be worth \$3,500.00 in one year.  The interest rate (discount  rate) that the bank pays is 4%.  What is the present value of your bank account today?  What  would the present value of the account be if the discount rate is only 3%? PV=FV/(1.04)^1 = 3500/1.04=3365.38 PV=FV/(1.03)^1 = 3500/1.03=3398.06 B . Suppose you have two bank accounts, one called Account A and another Account B.  Account  A will be worth \$4,000.00 in one year.  Account B will be worth \$7,600.00 in two years.  Both  accounts earn 4% interest.  What is the present value of each of these accounts? PV=FV/(1.04)^1 = 4000/1.04=3846.15 PV=FV/(1.04)^2 = 7600/1.04^2=7026.62 C.  Suppose you just inherited an gold mine.  This gold mine is believed to have three years worth  of gold deposit.  Here is how much income this gold mine is projected to bring you each year for  the next three years: Compute the present value of this stream of income at a discount rate of

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FINANCE 301-MODULE-2-CASE - FINANCE 301 MODULE 2 CASE...

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