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# Time Value of Money Concepts

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1. Probability of Occurrence

2% 8% 20% 40% 20% 8% 2%
\$800 \$1,000 \$1,400 \$2,000 \$2,600 \$3,000 \$3,200

Calculate the expected value, standard deviation, and coefficient of variation of sales revenue of PSC
2. How much will you have in 10 years if you deposit \$5,000 today and earn 8 percent annual interest.
3. Norton is going to receive a graduation present of \$9000 from his grandparents in four years. If the discount rate is 8 percent, what is this gift worth today?
4. You deposit \$1000 in an account that pays 8 percent interest, compounded annually. how long will it take to double your money?

5. The Robinsons have found the house of their dreams. They have \$50,000 to use as a down payment and they want to borrow \$250,000 from the bank. The current mortgage interest rate is 6 percent. If they make equal monthly payments for fifteen years, how much will their monthly mortgage payment be?

#### Solution Preview

Please refer attached file for complete solution. Work done with the equation writer is missing here.

Solutions
1.

Probability Sales Revenue
P R P*R (R-Mean)^2 P*(R-Mean)^2
2% 800 16 1440000 28800
8% 1000 80 1000000 80000
20% 1400 280 360000 72000
40% 2000 800 0 0
20% 2600 520 360000 72000
8% 3000 240 ...

#### Solution Summary

There are five problems. Solution to first problems explains the steps to calculate expected value, standard deviation, and coefficient of variation of sales revenue. Solutions to other two problems describe the steps to calculate present and future values. Solution to fourth problem calculates the time needed to double the amount. Solution to last problem shows step by step method to calculate equal monthly mortgage payment.

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