Time Value of Money
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1.) John Longwaite will receive $100,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future "pot of gold"?
2.) Al Lopez invests $2,000 in a mint condition Nolan Ryan baseball card. He expects the card to increase in value by 20 percent a years for the next five years. After that, he anticipates a 15 percent annual increase for the next three years. What is the projected value of the card after eight years?
3.) You wish to retire in 20 years, at which time you want to have accumulated enough money to receive an annuity of $12,000 for 25 years after retirement. During the period before retirement you can earn 8 percent annually, while after retirement you can earn 10 percent on your money.
What annual contributions to the retirement fund will allow you to receive the $12,000 annuity?
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Solution Summary
The solution has various time value of money problems relating to present value, future value and annuity
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1.) John Longwaite will receive $100,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future "pot of gold"?
Use the PVIF table to get the discounting factor. The time period is 50 years and the interst rate is 14%. The dicounting factor from PVIF table is .001 and the present value is 100,000X.001=$100.
2.) Al Lopez invests $2,000 in a mint condition Nolan Ryan baseball card. He expects the card to increase in value by 20 percent a years for the next five years. After that, he anticipates a 15 percent annual ...
Purchase this Solution
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