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17 Jan 2019
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?
| 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? | |
Jean KeelingLv2
18 Jan 2019
Related questions
Part I:
Solve 4 of the following time value of money problems by filling inthe 4 columns to the right of the description.
Be sure to solve 1 problem from each of the following 4 categorieslisted under Problem Types. I have completed the first row as anexample.
Part II:
Discuss how you may use time value of money concepts in yourpersonal life. For example, saving for college tuition orretirement, paying off a car loan or home mortgage. Give specificdetails as to how you would use these formulas for more effectivedecision making. Create 1 description and fill in the table foryour newly created question.
Problem Types:
1 pv = present value of $1
2 fv = future value of $1
3 PVAo = Present Value of an Ordinary Annuity of$1 (payment at end of period)
4 FVAo = Future Value of an Annuity of $1(payment at end of period)
| Description | Type of Problem | Table | Formula | Answer | |
| 1 | How much money must your rich unclegive you now to finance four years of college, assuming an annualcost of $48,000 and an interest rate of 6% (applied to theprincipal until disbursed)? | Present Value of anordinary Annuity | PVAo | PV = 48,000(3.465) | $166,325.07 |
| 2 | How much interest would you earn ifyou deposited $300 at 6 percent for 27 months? | ||||
| 3 | If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2%, how much will it be worth in fiveyears? | ||||
| 4 | How much interest would you pay toborrow $670 for eight months at 12 percent? | ||||
| 5 | You wish to borrow $18,000 to buy anew auto-mobile. Rate is 8.6% over five years with monthlypayments. Find the monthly payment. | ||||
| 6 | What is the future value of $800 at8 percent after six years? | ||||
| 7 | How much would you have in savingsif you kept $200 on deposit for eight years at 8% compoundedsemiannually? | ||||
| 8 | You choose to invest $50/month in a401(k) that invests in an international stock mutual fund. Assumingan annual rate of return of 9%, how much will this fund worth ifretiring in forty years? | ||||
| 9 | What is the future value of anannual deposit of $230 earning 6 percent for 15years? | ||||
| 10 | If you invest $600/Year in a 401(k)that invests in an international stock mutual fund. Assuming anannual rate of return of 9%, how much will this fund worth ifretiring in forty years? | ||||
| 11 | What amount would you have in aretirement account if you made annual deposits of $375 for 25 yearsearning 12 percent, compounded annually? | ||||
| 12 | What is the present value of $2,200earning 15 percent for eight years? | ||||
| 13 | How much money must you set asideat age 20 to accumulate retirement funds of $100,000 at age 65,assuming a rate of interest of 7%? | ||||
| 14 | To have $6,000 for a childâseducation in 10 years, what amount should a parent deposit in asavings account that earns 12 percent, compoundedquarterly? | ||||
| 15 | If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2% with quarterly compounding, how muchwill it be worth in five years? | ||||
| 16 | What is the present value of awithdrawal of $200 at the end of each year for 14 years with aninterest rate of 7 percent? | ||||
| 17 | How much would you have to depositnow to be able to withdraw $650 at the end of each year for 20years from an account that earns 11 percent? | ||||
| 18 | What would be the annual paymentamount for a $20,000, 10-year loan at 7 percent? |
