# Interest rates and future value in 1895 the first us

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11. Interest Rates and Future Value
In 1895, the first U.S. Open Golf Championship was held. The winner’s prize money was \$150. In 2016, the winner’s check was \$1,800,000. What was the percentage increase per year in the winner’s check over this period?
If the winner’s prize increases at the same rate, what will it be in 2040?
12. Calculating Rates of Return The “Brasher doubloon,” which was featured in the plot of the Raymond Chandler novel, The High Window, was sold at auction in 2014 for \$4,582,500. The coin had a face value of \$15 when it was first issued in 1787 and had been previously sold for \$430,000 in 1979. At what annual rate of return did the coin appreciate from its minting to the 1979 sale? t
What annual rate of return did the 1979 buyer earn on his purchase? t
At what annual rate of return did the coin appreciate from its minting to the 2014 sale? t
r = (FV/PV) 1/ t – 1 r = (\$4,582,500/\$15) 1/227 – 1 r = .0572, or 5.72% 13. Calculating rates of return a. Assuming you purchased a \$50 face value bond, what is the exact rate of return you would earn if you held the bond for 20 years until it doubled in value
b. If you purchased a \$50 face value bond in early 2017 at the then current interest rate of .10 percent per year, how much would the bond be worth in 2027?
c. In 2027, instead of cashing the bond in for its then current value, you decide to hold the bond until it doubles in face value in 2037. What rate of return will you earn over the last 10 years?
Homework: Chapter 6 1. Present Value and Multiple Cash Flow
If the discount rate is 10, 18, and 24 percent, what is the present value of these cash flows? t
2. Present Value and Multiple Cash Flows Investment X offers to pay you \$5,200 per year for eight years, whereas Investment Y offers to pay you \$7,300 per year for five years. Calculate the present value for Investment X and Y if the discount rate is 5 percent. r )