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