FINC 3610 - Yost FINC 3610: Principles of Business Finance Time Value of Money Practice Problems 1. You are looking to purchase a 52” plasma television when you graduate in two years. You plan to deposit the money in an investment account earning 8 percent annually. The anticipated cost of the television in two years is $2,500. How much must you deposit today? 2. When you were born 21 years ago, your Aunt Burtha put $2,000 into a saving account for you. The account has earned an average annual return of 4 percent per year, and nothing else has been deposited or withdrawn from the account. How much is there today? 3. Aunt Burtha also put $2,000 into a different savings account for your brother when he was born 18 years ago. If his account has $4,813.24 in it today, what rate of return did his account earn? 4. You decide to borrow money from Cousin Vinnie and he has agreed to a 20 percent interest rate per year. If you borrowed $200 last year, and know you have to pay him in full exactly $716.64 (and make no other payments to him), how long from now until you
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This note was uploaded on 12/11/2011 for the course FINC 3610 taught by Professor Yost during the Fall '08 term at Auburn University.