02 Time Value Questions 1-14

02 Time Value Questions 1-14 - FIN 301 Time Value of Money...

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FIN 301 Time Value of Money (TVM) Exercises (Compound and Simple Interest) 1. You put $1,000 in a CD that pays 8% annually. How much is it worth at the end of 5 years? 2. What if only simple interest had been paid? (Time of investment) 3. You currently have $1000. You need $6000 for a down payment on a house. If the annual interest rate is 15% how many years do you have to wait (Assume no further direct cash contributions to the account.) What if simple interest had been paid? (Finding the interest rate) 4. Suppose you have $500 today. You want to invest the money for 4 years and buy a car with the proceeds. You would like to have $1000 to spend at that time. What interest rate does your investment need to earn to allow this? (Multiple cash flows) 5. Suppose you make the following deposits to an account that pays 8% annually. The deposits are made at the end of the year. C 1 800 = $ C 2 1000 = $ C 3 400 = $ C 4 500 = $ How much is this account worth at the end of year 4? Suppose someone offered you the same stream of payment as above in exchange for
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This note was uploaded on 11/01/2011 for the course BUSINESS FIN301 taught by Professor Andrew during the Fall '10 term at University of Alberta.

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02 Time Value Questions 1-14 - FIN 301 Time Value of Money...

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