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Determine the current amount of money that must be invested at 12% interest compounded monthly to provide an annuity of $10,000 per year for 6 years, starting 12 years from now. The interest rate remains constant over this entire period of time.

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Patrina Schowalter
Patrina SchowalterLv2
28 Sep 2019

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Part One: Quantitative Exercises
Questions Answers
1. Future Value. What is the future value of
a. $800 invested for 14 years at 11 percent compoundedannually?
b. $210 invested for 8 years at 9 percent compounded annually?
c. $650 invested for 12 years at 8 percent compoundedannually?
2. Present Value. What is the present value of
a. $803 to be received 18 years from now at a 10 percent discountrate?
b. $406 to be received 7 years from now at a 5 percent discountrate?
c. $400 to be received 10 years from now at a 9 percent discountrate?
3. Future Value of an Annuity. What is the future value of
a. $557 a year for 12 years at 5 percent compounded annually?
b. $748 a year for 9 years at 12 percent compounded annually?
c. $442 a year for 7 years at 11 percent compounded annually?
4. Present Value of an Annuity. What is the present valueof
a. $1,163 a year for 12 years at an 7 percent discount rate?
b. $329 a year for 6years at a 12 percent discount rate?
c. $365 a year for 20 years at a 14 percent discount rate?
5. How many years will it take to grow
a. $765 to a value of 2,028.19 at a compound rate of 14percent?
b. $321 to a value of 450.22 at a compound rate of 12 percent?
c. $881 to a value of 1,305.78 at a compound rate of 7percent?
6. Interest Rate. At what interest rate will it take togrow
a. $800to a value of 1,017.13 over 6 years?
b. $600 to a value of 1,082.08 over 5 years?
c. $401 to a value of 1,311.16 over 6 years?
7. Car Loans (Hint: P/Y=12). How much is a car loan with apayment of
a.$453 per month for 3 years at 6% interest per year?
b.$466 per month for 5 years at 15% interest per year?
c.$301 per month for 6 years at 7% interest per year?
8. Mortgages (Hint: P/Y=12).
What was the initial mortgage on thehouse?
a.$4,369.66 per month for 30 years at 8 percent interest?
b.$1,626.83 per month for 15 years at 4 percent interest?
c. $3,724.21 per month for 30 years at 18 percent interest?
9. Mortgages (Hint: P/Y=12). What is the payoff on a 30year, 6% mortgage of
a.$255,413 with a payment of 1,321.33 with 8 years remaining?
b.$530,493 with a payment of 3,180.57 with 12 years remaining?
c. $297,266 with a payment of 1,782.26 with 11 yearsremaining?

Time Value Analysis - Pensacola Surgery Center Case 12

Cases in Healthcare Finance - Louis C. Gapenski

3. Now consider the surgery centers' goal of having $200,00available in five years to buy new patient billing system.

a. What lump sum amount must be invested today in a CD paying 10percent annual interest to accumulate the needed $200,000?

b. What annual interest rate is needed to produce $200,000 after5 years if only $100,00 is invested?

4. Now consider a second alternative for accumulating funds tobuy the new billing system. In lieu of a lump sum investment,assume that five annual payments of $32,000 are made at the end ofeach year.

a. Waht type of annuity is this?

b. What is the present value of this annuity if the opportunitycost rate is 10 percent annually? 10 percent compoundedsemiannually?

c. What is the future value of this annuity if the payments areinvested in an account that pays 10 percent interest annually? 10percent compounded semiannually?

f. Suppose the payments are only $16,000 each, but they are madeevery six months, starting six months from now. What will thefuture value be if the ten payments were invested at 10 percentannual interest? If invested at BankSouth at 10 percent compoundedsemiannually?

An insurance settlement of $2.5 million must replace Trixie Eden's income for the next 50 years. What income will this settlement provide at the end of each month if it is invested in an annuity that earns 8.3%, compounded monthly?

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