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# Finance: Present value and Future value analysis.

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you have applied for a job at a local bank. as part of its evaluation process, you must take an examination on time value of money analysis covering the following...

b. 1) whats the future value of \$100 after 3 years if it earns 10% annual compounding?
2) whats the present value of \$100 to be received in 3 years if the interest rate is 10% annual compounding?

c. what annual interest rate would cause \$100 to grow to \$125.97 in 3 years?

d. if a company's sales are growing at a rate of 20% annually, how long will it take sales to double?

e. what's the difference between an ordinary annuity and an annuity due? What type of annuity is shown here? How would you change it the other type of annuity?
0 1 2 3
|¬¬¬------------|-----------|----------|
0 \$100 \$100 \$100

f. 1) what is the future value of a 3-year, \$100 ordinary annuity if the annual interest rate is 10%?
2) what is its present value?
3) what would the future and present values be if it was an annuity due?

g. A 5-year \$100 ordinary annuity has an annual interest rate of 10%.
1) what is its present value?
2) what would the present value be if it was a 10-year annuity?
3) what would the present value be if it was a 25-year annuity?

h. A 20-year-old student wants to save \$3 a day for her retirement. Every day she places \$3 in a drawer. At the end of each year, she invests the accumulated savings (1,095) in a brokerage account with an expected annual return of 12%.
1) if she keeps saving in this matter, how much will she have accumulated at age 65?
2) if a 40-year-old invested began saving in this matter, how much would he have at age 65?
3) how much would the 40-year-old investor have to save each year to accumulate the same amount at 65 as the 20-year-old investor?