CHAPTER7HANDOUT

CHAPTER7HANDOUT - 6 You will receive \$500 starting this...

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Chapter 7 Part I: Problems 1) You are given \$100 each year starting next year and finishing in 10 years (t=10). If the interest rate is 6% p.a., what is the present value of these cash flows? How much will be in your bank account after 10 years? 2) You are offered an investment which will pay you \$250 every year starting one year from today and goes on forever. If the interest rate is 4% p.a., what is the present value of these cash flows? 3) You have invested your money into a project that will pay you \$1,000 starting five years from today and will continue to pay out until thirty years from today (t=30). If the interest rate is 6% p.a., what is the present value of these cash flows? 4) A person is willing to give you \$1,000 today in exchange for payments of \$200 starting next year and ending in 20 years (t=20). What is the interest rate (p.a.) that you would be paying?

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5) An investment will pay you \$50 each year starting today and going on forever. If the interest rate is 8% p.a., what is the present value of these cash flows?
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Unformatted text preview: 6) You will receive \$500 starting this year and will be paid this every year for 10 years (last \$500 payment at t=10). After this, you will be paid \$100 forever. If the interest rate is 5% p.a., what is the present value of these cash flows? 7) You are trying to save money for retirement. You wish to have \$100,000 in your retirement account in 25 years. You plan on doing this by making equal deposits into your savings account each year starting today. If the interest rate is 4% p.a., how much do you need to deposit each year? 8) You plan on saving money for retirement in 30 years (t=30) at which time, you wish to have saved \$1,000,000. In order to do this you plan on depositing \$10,000 into the bank for 10 years starting next year (last \$10,000 deposit at t=10). And then deposit \$x every year after that until your retirement day (last deposit of \$x at t=30). If the interest rate is 6% p.a., what is the \$x you must deposit?...
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This note was uploaded on 12/04/2011 for the course FIN 3300 taught by Professor Toddstotnitch during the Fall '11 term at Georgia State.

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CHAPTER7HANDOUT - 6 You will receive \$500 starting this...

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