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%?
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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