QUESTIONS FOR CHAPTER 4 (Time Value of Money)

QUESTIONS FOR CHAPTER 4 (Time Value of Money) - Dr....

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Dr. Sudhakar Raju FN 3000 ASSIGNMENT QUESTIONS FOR CHAPTER 4 (Time Value of Money) 1. First City Bank pays 7 percent simple interest on its savings account balances, whereas Second City Bank pays 7 percent interest compounded annually. If you made a $6,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years? 2. For each of the following, compute the future value: Present Value Years Interest Rate Future Value $3,150 3 18% 7,810 10 6 89,305 17 12 227,382 22 5 3. For each of the following, compute the present value: Present Value Years Interest Rate Future Value 9 4% $15,451 4 12 51,557 16 22 886,073 21 20 550,164 4. Solve for the unknown interest rate in each of the following Present Value Years Interest Rate Future Value $221 5 $307 425 7 761 25,000 18 136,771 40,200 16 255,810 5. Solve for the unknown number of years in each of the following: Present Value Years Interest Rate Future Value $250 6% $1,105 1,941 5 3,860 21,320 14 387,120 32,500 29 198,212 1
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6. Assume the total cost of a college education will be $280,000 when your child enters college in 18 years. You presently have $39,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child’s college education? 7. At 7 percent interest, how long does it take to double your money?
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This note was uploaded on 02/28/2012 for the course FIN 3313 taught by Professor Yi during the Spring '12 term at Texas State.

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QUESTIONS FOR CHAPTER 4 (Time Value of Money) - Dr....

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