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Time Value of Money and Rate of Interest

1. How much would you accept in lump sum today, in place of a lottery payment of $50,000 at the end of each of 20 years. ($1.000,000 in total), assuming you could invest it at an 8% rate?

2. What will be the value in 20 years of $5,000 contributed at the end of each year into an IRA (individual retirement account) which pays 8%?

3. What should you be willing to pay today for a contract to receive $50,000 in 10 years assuming an 8% interest rate?

4. What rate of interest am I paying if my monthly payment is $400.00 on a $15,000 loan to be paid off in 4 years?

Solution Summary

This solution shows step-by-step calculations in an Excel file to determine the lump sum payments, value of individual retirement accounts, contracts with interest rate, and loan interest rates.