Explore BrainMass

Explore BrainMass

    Various time value of money problems

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please check my computations to the following questions on the attached spreadsheet. I know that my answers for # 3 are wrong and that the correct answers are $4,167.62, $ 4,313.71, and $ 5,001.15 but I can't figure out what I'm doing wrong. I don't know if my other answers are correct or not.

    Question 3 - Future Value and Multiple Cash Flows
    Officer, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at a discount rate of 11 percent? At 24 percent?

    Year Cash Flow
    1 $ 500
    2 900
    3 1100
    4 1300

    Question 4 - Calculating Annuity Present Value
    An investment offers $ 6,000 per year for 15 years, with the first payment occurring 1 year from now. If the required return is 8 percent, what is the value of the investment? What would the value be if the payments occurred for 40 years? For 75 years? Forever?

    Question 7 - Calculating Annuity Values
    If you deposit $ 2,000 at the end of each of the next 20 years into an account paying 7.5 percent interest, how much money will you have in the account in 20 years? How much will you have if you make deposits for 40 years?

    Question 19 - EAR versus APR
    Ricky Ripov's Pawn Shop charges an interest rate of 20 percent per month on loans to its customers. Like all lenders, Ricky must report an APR to consumers. What rate should the shop report? What is the effective annual rate?

    Question 20 - Calculating Loan Payments
    You want to buys a new sports coupe for $ 52,350, and the finance office at the dealership has quoted you an 8.6 percent APR loan for 60 months to buy the car. What will your monthly payments be? What is the effective annual rate on this loan?

    Question 24 - Calculating Annuity Future Values
    You are to make monthly deposits of $200 into a retirement account that pays 11 percent interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years?

    Question 55 - Amortization with Equal Payments
    Prepare an amortization schedule for a three-year loan of $ 60,000. The interest rate is 11 percent per year, and the loan calls for equal annual payments. How much interest is paid in the third year? How much total interest is paid over the life of the loan?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:02 pm ad1c9bdddf


    Solution Preview

    I have corrected your answer 3. The first payment is to be compounded for 3 years. You were compounding ...

    Solution Summary

    The solution has various problems in time value of money relating to annuities, future value and loan payments