Time Value of Money Problems
Handout 2
1.
You're trying to save up for a big vacation.
You want to take a trip
around the world when you graduate in three years. If you can earn 16%
on your investments, how much would you have to deposit in order to
have $20,000 when you graduate?
2.
Would you rather have $463 now or $1000 10 years from now?
You can
earn 6% on any investments.
3.
You can buy a mortgage from a mortgage broker.
Mortgage payments
are $30,000 per year and there are 16 years to maturity.
The broker is
asking $325,000 for the note.
You already hold similar mortgages and
they yield 12%.
Should you buy this note?
4.
At an interest rate of 12% how long would it take a sum of money to
double?
5.
At 8% how long would it take to triple your money?
6.
Your uncle lends you $1000 today with the promise that you pay him back
$1728 in three years.
What rate of interest is he charging you?
7.
Your company is required to pay into a sinking fund each year in order to
meet an obligation which matures in 10 years.
The amount of the
obligation is $100,000 and you can earn 4% on your deposits.
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 Spring '12
 HaroldWilliamson
 Interest Rates, Time Value Of Money, Interest, Interest Rate, Personal Finance

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