Scribd
Upload
142 views2 pages

Time Value of Money Exercises

This document contains 8 questions about time value of money concepts including present and future value calculations. It asks the reader to calculate future and present values given interest rates and cash flows over time, as well as determining savings needed to reach a target amount in the future. The questions cover topics such as compound interest, annuities, perpetuities, and savings plans.

Uploaded by

tai kianhong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
142 views2 pages

Time Value of Money Exercises

This document contains 8 questions about time value of money concepts including present and future value calculations. It asks the reader to calculate future and present values given interest rates and cash flows over time, as well as determining savings needed to reach a target amount in the future. The questions cover topics such as compound interest, annuities, perpetuities, and savings plans.

Uploaded by

tai kianhong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

BWFF2043

TIME VALUE OF MONEY

1. Sue now has RM125. How much would she have after 8 years if she leaves it
invested at 8.5% with annual compounding?

2. How much would RM20,000 due in 50 years be worth today if the discount rate
were 7.5%?

3. What’s the present value of a perpetuity that pays RM250 per year if the
appropriate interest rate is 5%?

4. What is the present value of the following cash flow stream at a rate of 12.0%?

Years: 0 1 2 3 4
| | | | |
CFs: RM0 RM1,500 RM3,000 RM4,500 RM6,000

5. You want to buy a new sports car 3 years from now, and you plan to save
RM4,200 per year, beginning one year from today. You will deposit your savings
in an account that pays 5.2% interest. How much will you have just after you
make the 3rd deposit, 3 years from now?

6. You just inherited some money, and a broker offers to sell you an annuity that
pays RM5,000 at the end of each year for 20 years. You could earn 5% on your
money in other investments with equal risk. What is the most you should pay for
the annuity?

7. Your sister turned 35 today, and she is planning to save RM7,000 per year for
retirement, with the first deposit to be made one year from today. She will invest
in a mutual fund that's expected to provide a return of 7.5% per year. She plans
to retire 30 years from today, when she turns 65, and she expects to live for 25
years after retirement, to age 90. Under these assumptions, how much can she
spend each year after she retires? Her first withdrawal will be made at the end of
her first retirement year.

8. After graduation, you plan to work for Dynamo Corporation for 12 years and then
start your own business. You expect to save and deposit RM7,500 a year for the
first 6 years and RM15,000 annually for the following 6 years. The first deposit
will be made a year from today. In addition, your grandfather just gave you a
RM25,000 graduation gift which you will deposit immediately. If the account
earns 9% compounded annually, how much will you have when you start your
business 12 years from now?

You might also like