Time Value Of Money

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Problem 1: Mark Greene invests $30,000 at 8% annual interest leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Mark withdrew the accumulated amount of money. How much did Mark withdraw assuming that interest compounded semiannually? Part A: Table 6-1 Part B: 4% Part C: 16N Part D: FV = PV(IF) 30000(1.87298) 56189.40 Problem 2: Doug Ross is saving to start his own medical practice. He projects that he will need to have $500,000 in 5 years in order to get the business off the ground. He has found an investment that will yield 12% interest compounded quarterly. How much will he need to invest today to have the amount he requires to start his practice? Part A: Table 6-2 Part B: 3% Part C: 20N Part D: PV = FV(IF) 500000(.55368) 276840 Problem 3: Elizabeth Corday is borrowing $20,000 at 11% over 6 years. She will make annual payments on the loan at the end of each year. How much are each of Elizabeth’s payments? Part A: Table 6-4 Part B: 11% Part C: 6N Part D: 20000 = R(4.23054) 4.23054 4.23054 R = 4727.53 Problem 4: Derek Lee just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 6% compounded annually. If Lee plans to establish the DL Foundation once the fund grows to $1,898,000, how many years until he can establish the foundation? Part A: Table 6-1 Part B: 6% Part C: 11N Part D: 1898000 = 1000000X 1000000 1000000 X = 1.898 Problem 5: James Kirk has just inherited some money from a long lost relative. The inheritance is set up so that James will receive $20,000 per year for the next 25 years starting

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