# Time value of money computations

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 Preview

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 ...

#### 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.