Time value of money computations
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1) If you invest today, how much will you have :
a. In 2 years at 9%?
b. In 7 years at 12%?
c. In 25 years at 14%?
c. In 25 years at 14% (compound semiannually)?
2) How much would you have to invest today to receive:
a. $15,000 in 8 years at 10%?
b. $20,000 in 12 years at 13%?
c. $6,000 each years for 10 years at 9%?
d. $50,000 each year for 50 years at 7%?
3) If you invest $2,000 a year in a retirement account, how much will you have:
a. In 5 years at 6%?
b. In 20 years at 10%?
c. In 40 years at 12%?
4) Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year; $2.20 at the end of the second year; and $2.40 at the end of the third year. Also, he believes that at the edn of the third year the will be able to sell the stock for $33.
What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.)
**Please show all the work, I tried to do it but I am not sure if what I did is right.
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Solution Summary
Response provide the steps and illustrations for the computations of time value of money questions such as finding out the present value , future value etc.
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1)Say you invest $9,000 today, how much will you have:
P=present value, F= Future value i= rate of interest n=duration
F=P*(1+i)^n
a. In 2 years at 9 percent? = 10692.90
b. In 7 years at 12 percent? = 19896.13
c. In 25 years at 14 percent? = 238157.24
d. In 25 years at 14 percent (compounded semiannually)? = 265113.23
Here i will be divided by half and duration will be multiplied by 2 as
there is compounding semiannually
2)How much would ...
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