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# Assessing the time value of money

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1. How much should Elton John invest at the end of each year for six years if he expects to earn 6% and he wants to accumulate \$150,000 in order to buy a new grand piano six years from today?

2. How much must Elton John invest today if he expects to earn 6% compounded semiannually and he wants to accumulate \$150,000 in order to buy a new grand piano six years from today?

3. How much should Elton John invest today if he expects to earn 6% and he wants to accumulate \$150,000 in order to buy a new grand piano six years from today?

4. Michael is depositing \$4,095 at the end of each year in a fund that earns 10%. How many years will be required for the balance in the fund to become \$25,000?

5. Elizabeth is investing \$300,000 in a fund that earns 6% interest compounded annually. What equal amount can Elizabeth withdraw at the end of each of the next ten years?

6. Elizabeth Taylor will receive a lump sum of \$300,000 five years from now from a trust fund established by a former husband. Assume that the appropriate interest rate for discounting is 8 percent, compounded quarterly. What is the present value today of the future distribution?

7. XYZ Corporation issues \$1,000,000 of 9% bonds due in 20 years. Interest is payable at the end of each year. The current market rate of interest for bonds of similar risk is 8%. What amount will XYZ Corporation receive when the bonds are issued?

8. Demetrius is a senior in high school He inherited \$8,000 from his grandmother. Demetrius plans to save the inheritance with the hope that it will grow and provide enough money for him to buy a new car when he graduates from college. If he deposits the funds in the bank in an account that will earn 8%, how much money should Demetrius have in five years?