Chapter_6_Accounting_And_The_Time_Value_Of_Money_Class_Examples

Chapter_6_Accounting_And_The_Time_Value_Of_Money_Class_Examples

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CHAPTER 6 – TIME VALUE OF MONEY Examples 1. Invest $2,000 now at 6%. Compound annually. How much will you have in two years? 2. Invest $5,000 now at 8%. Compound annually. How much will you have in five years?
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CHAPTER 6 – TIME VALUE OF MONEY 3. Your brother buys your used car and offers you three different payment plans: a. $900 now to settle the debt b. $250 now and $100/qtr for the next 10 qtrs. c. $500 now and $600 in one year. Assume your investment opportunity cost is 8% compounded quarterly. Which option will you select? What if your opportunity cost is 12%?
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CHAPTER 6 – TIME VALUE OF MONEY 4. You want to buy a new recordable DVD player. The store gives you three different payment options: a. $600 cash now b. $35/month for 20 months c. $100 down and $40/month for 15 months The interest rate the store charges is 24% and is compounded monthly. Which alternative will you choose?
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CHAPTER 6 – TIME VALUE OF MONEY 5. You win a lottery. You can either receive $500,000 now or
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Chapter_6_Accounting_And_The_Time_Value_Of_Money_Class_Examples

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