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ECO280 ProblemSet4

This document contains 6 problems from a problem set for an economics course. The problems involve calculating present and future values of cash flows using interest rates of 8%, 10%, and 6% compounded annually. The calculations require using the time value of money formula to find equivalent values over different time periods for deposits, withdrawals, and savings goals.

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136 views

ECO280 ProblemSet4

This document contains 6 problems from a problem set for an economics course. The problems involve calculating present and future values of cash flows using interest rates of 8%, 10%, and 6% compounded annually. The calculations require using the time value of money formula to find equivalent values over different time periods for deposits, withdrawals, and savings goals.

Uploaded by

MertYakar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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METU NCC

ECO 280
Spring 2014 - 2015
Problem set 4

3.50) Find the present worth of the cash receipts (Figure) where i=10% compounded annually
with only four interest factors.

3.51) Find the equivalent present worth of the cash receipts where i=8%. In other words, how
much do you have to deposit now so that you will be able to withdraw $200 at the end of
second year, $120 at the end of third year, and so forth if the bank pays you an 8% interest on
your balance?

3.53) The two cash flow transactions shown in the accompanying cash flow diagram are said
to be equivalent at 6% interest. Find the unknown value of x.

3.58) Find the value of X so that the cash flows shown in the diagram (Figure 3.58) are
equivalent for an interest rate of 8%.

3.65) Henry Cisco is planning to make two deposits: $25000 now and $30000 at the end of
year 6. He wants to withdraw C at the end of each year for the first 6 years and (C+1000) for
the next 6 years. Determine the value of C if the deposits earn 10% interest compounded
annually.

3.69) How long will it take to save $1 million if you invest $2000 each year at 6%?

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