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    Tutorial 2 Answer

    Uploaded by

    Koay HV
    This document contains 6 questions regarding time value of money calculations: 1) Calculating the future value of RM500 invested at 7% for 4.5 years 2) Determining the present value needed to have RM65,000 in 3 years at 10% 3) Finding the future value of RM250,000 invested for 9 years at 8% 4) Solving for the present value needed to achieve RM200,000 in 20 years at 3% 5) Calculating the number of years for a company to recover a $170,000 investment paying $30,000 annual rents at 12% 6) Using interpolation and formulas to find future and present value factors

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    Tutorial 2 Answer

    Uploaded by

    Koay HV
    288 views3 pages
    This document contains 6 questions regarding time value of money calculations: 1) Calculating the future value of RM500 invested at 7% for 4.5 years 2) Determining the present value needed to have RM65,000 in 3 years at 10% 3) Finding the future value of RM250,000 invested for 9 years at 8% 4) Solving for the present value needed to achieve RM200,000 in 20 years at 3% 5) Calculating the number of years for a company to recover a $170,000 investment paying $30,000 annual rents at 12% 6) Using interpolation and formulas to find future and present value factors

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    Tutorial 2 Answer

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    This document contains 6 questions regarding time value of money calculations: 1) Calculating the future value of RM500 invested at 7% for 4.5 years 2) Determining the present value needed to have RM65,000 in 3 years at 10% 3) Finding the future value of RM250,000 invested for 9 years at 8% 4) Solving for the present value needed to achieve RM200,000 in 20 years at 3% 5) Calculating the number of years for a company to recover a $170,000 investment paying $30,000 annual rents at 12% 6) Using interpolation and formulas to find future and present value factors

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    288 views3 pages

    Tutorial 2 Answer

    Uploaded by

    Koay HV
    This document contains 6 questions regarding time value of money calculations: 1) Calculating the future value of RM500 invested at 7% for 4.5 years 2) Determining the present value needed to have RM65,000 in 3 years at 10% 3) Finding the future value of RM250,000 invested for 9 years at 8% 4) Solving for the present value needed to achieve RM200,000 in 20 years at 3% 5) Calculating the number of years for a company to recover a $170,000 investment paying $30,000 annual rents at 12% 6) Using interpolation and formulas to find future and present value factors

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 3

    KIX2002: Tutorial 2 - Time Value Money Part 1

    1) What is the future equivalent of RM500 invested at 7% simple interest per year for 4.5 years?

    2) How much should company ABC be willing to put aside some money to buy an equipment that will
    cost the company RM65, 000 three years from now, if the interest rate is 10% per year?

    3) A paper box company is planning to set aside RM250, 000 now for possibly replacing the motor for
    one of the machine. If the replacement is not needed for 9 years, how much will the company have in
    account if it interest at a rate of 8% a year?

    4) You just inherited RM120, 000. How much you should you deposit in an account earning 3% interest
    per year if you’d like to have RM200, 000 in the account in 20 years.

    5) Firm XYZ is considering the purchase of the building it currently leases. Since the lease is already paid
    for this year, the next annual lease payment of $30,000 isn’t due until the end of this year. If the
    company purchases the building now for $170,000 with no money down, how long will it be before the
    company recovers its investment at an interest rate of 12% per year?

    6) Find the numerical value of the following factors by (a) Interpolation and; b) using the appropriate
    formula

    i) (F/P, 17%, 20)

    ii) (P/A, 21%, 8)

    Solutions

    1) I = (P)(N)(i)

    = 500 x 4.5 x 0.08

    = RM180

    So the future equivalence will be RM500 + RM180 = RM680

    2) P = 65,000 (P/F, 10%, 3)

    = 65,000 (0.7513)

    = RM48,834.5
    3) F = 250,000(F/P, 8%, 9)

    = 250,000(1.9926)

    = RM498,150

    4) P = 200,000(P/F, 3%, 20)

    = 200,000 (0.5537)

    = RM110,740

    5) 170,000 = 30,000(P/A, 12%, n)

    (P/A, 12%, n) = 5.6667

    (1+𝑖)𝑁 −1
    [ 𝑖(1+𝑖)𝑁
    ]= 5.6667 (solve the mathematics or alternatively use the interpolation (MUCH EASIER)

    N = 10.05 years

    6)

    1a) Interpolate between i = 16% and i= 18%

    16 = 19.4608

    17 = ?

    18 = 27.3930
    1 𝑐
    2
    = 27.3930−19.4608

    C = 3.9661

    (F/P, 17%, 20) = 19.4608 + 3.9661

    = 23.4269

    1b) (F/P, 17%, 20) = (1+0.17)20

    = 23.1056
    2a) Interpolate between i = 20% and i = 22%

    20 = 3.8372

    21 = ?

    22 = 3.6193
    1 𝑐
    2
    = 3.8372−3.6193

    C = 0.1090

    (P/A, 21%, 8) = 3.8372 – 1.1090

    = 3.7282

    (1+0.21)8 −1
    2b) (P/A, 21%, 8) = [ ]
    0.21(1+0.21)8

    (1.21)8 −1
    = [0.21(1.21)8]

    = 3.73

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