742 Words3 Pages

TIME VALUE OF MONEY
Assignment
1. What is the present value of: a. $8,000 in 10 years at 6% b. $16,000 in 5 years at 12% c. $25,000 in 15 years at 8% d. $1,000 in 40 periods at 20% 2. If you invest $12,000 today, how much will you have: a. In 6 years at 7% b. In 15 years at 12% c. In 25 years at 10% d. In 25 years at 10% (compounded semi annually)? 3. How much would you have to invest today to receive: a. $12,000 in 6 years at 12% b. $15,000 in 15 years at 8% c. $5,000 each year for 10 years at 8% d. $40,000 each year for 40 years at 5% 4. Mrs. Crawford will receive $6,500 a year for the next 14 years from her trust. If an 8% interest rate is applied, what is the current value of the future payments? 5. General Mills will receive $27,500 per year for the next 10 years as a payment for a weapon it invented. If a 12% rate is applied, should it be willing to sell out its future rights now for $160,000? 6. Rita Gonzales won the $60 million lottery. She is to receive $1 million a year for the next 50 years plus an additional lump sum payment of $10 million after 50 years. The discount rate is 10%. What is the current value of her winnings? 7. Martha Reed has been depositing $1,500 in her savings account every December since 1998. Her account earns 6% compounded annually. How much will she have in December of 2007? (Assume that a deposit is made in 2007. Make sure to count the years carefully.) 8. Mr. Flint retired as president of the Color Tile Company but is currently on a consulting contract for $45,000 per year for the next 10 years. a. If Mr. Flint’s opportunity cost (potential return) is 10%, what is the present value of his consulting contract? b. Assuming that Mr. Flint will not retire for two more years and will not start to receive his 10 payments until the end of the third

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