Time Value of Money

  1. Find the future value of $400 if invested for two years at 14% with semi annual compounding.

 

 

  1. Find the present value of $500 discounted for five years at 12% with quarterly compounding.

 

 

  1. Find the present value of $2,000 due in two years at a discount rate of 10%.

 

 

  1. Find the future value of $3,000 due in one year compounded at 14%.

 

 

  1. Find the present value of an annuity due, $2,000 a year for five years at 10%.

 

 

  1. Find the present value of an ordinary annuity, $1,000 a year for ten years at 12%.

 

 

  1. Find the future value of an annuity due, $5,000 a year for 10 years at 12%.
  1. Find the future value of an ordinary annuity, $3,000 a year for five years at 8%.
  1. The Dickenson Company buys a machine for $500,000 and expects a return of $119,260.50 per year for the next 10 years.  What is the expected rate of return on the machine.
  1. Great Atlantic Mortgage offers to lend you $150,000; the loan calls for annual payments of $16,432.08 for twenty years.  What interest rate is the company charging you?
  1. Your broker offers to sell you a note for $3,992.70 that will pay $1,000 per year for five years.  If you buy the note, what rate of interest will you be earning?
  1. You are buying a new car.  You will borrow $8,000 from the bank in order to pay for the car.  The interest rate is 12%.  The loan requires monthly payments for two years.  What will be the monthly payments on the loan?
  1. Five years ago, a stock was earning 5% return.  This year, it has earned 16%.  What is the growth rate?

If you invest $100 a year for 25 years, making the payments at the end of the year, and the expected rate of return is 10% annually, how much will you have

  1. Now assume that you made the above payments at the beginning of the year instead of at the end of the year.  How much will you have
  1. Spartan Financial Corporation offers to lend you $75,000; the loan calls for annual payments of $9,860.51 for 15 years.  What rate of interest is the company charging you?
  1. If the periodic rate is 3%, and the interest is compounded quarterly, what is the APR?
  1. If the APR is 12% with quarterly compounding, what is the EFF or EAR?
  1. The lottery is $60,000,000 and the state offers to pay you $3,000,000 per year for the next 20 years, or you can take the lump sum today of $29,500,000.  If you choose to take the $3,000,000 per year for 20 years, the state will invest that $29,500,000 today so that it can give you those payments per year for 20 years. What rate will the $29,500,000 be invested at today to insure that the $3 million will be available to pay you every year for the next 20 years?
  1. Five years ago, I planted a tree that was three feet tall.  Today, the tree is twelve feet.  What was the annual growth rate?