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    Ch-5 Time Value of Money Problem

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    nasir mamun
    This document contains multiple word problems related to financial concepts such as compound interest, present and future value, time to double money, and effective interest rates. It asks the reader to calculate things like how long it will take an initial deposit to double at different interest rates, the present and future value of amounts with different interest rates compounded annually, the time it will take to reach a financial goal depositing a fixed amount each year, and the future and withdrawal value of annuities.

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    Ch-5 Time Value of Money Problem

    Uploaded by

    nasir mamun
    210 views3 pages
    This document contains multiple word problems related to financial concepts such as compound interest, present and future value, time to double money, and effective interest rates. It asks the reader to calculate things like how long it will take an initial deposit to double at different interest rates, the present and future value of amounts with different interest rates compounded annually, the time it will take to reach a financial goal depositing a fixed amount each year, and the future and withdrawal value of annuities.

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    Ch-5 Time value of money Problem

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    This document contains multiple word problems related to financial concepts such as compound interest, present and future value, time to double money, and effective interest rates. It asks the reader to calculate things like how long it will take an initial deposit to double at different interest rates, the present and future value of amounts with different interest rates compounded annually, the time it will take to reach a financial goal depositing a fixed amount each year, and the future and withdrawal value of annuities.

    Copyright:

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

    Ch-5 Time Value of Money Problem

    Uploaded by

    nasir mamun
    This document contains multiple word problems related to financial concepts such as compound interest, present and future value, time to double money, and effective interest rates. It asks the reader to calculate things like how long it will take an initial deposit to double at different interest rates, the present and future value of amounts with different interest rates compounded annually, the time it will take to reach a financial goal depositing a fixed amount each year, and the future and withdrawal value of annuities.

    Copyright:

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

    5-4 TIME FOR A LUMP SUM TO DOUBLE If you deposit money today in an account that pays

    6.5% annual interest, how long will it take to double your money?

    5-5 TIME TO REACH A FINANCIAL GOAL You have $42,180.53 in a brokerage account, and you
    plan to deposit an additional $5,000 at the end of every future year until your account totals
    $250,000. You expect to earn 12% annually on the account. How many years will it take to
    reach your goal?

    5-10 PRESENT AND FUTURE VALUES FOR DIFFERENT INTEREST RATES Find the following

    values. Compounding/discounting occurs annually.

    a. An initial $500 compounded for 10 years at 6%

    b. An initial $500 compounded for 10 years at 12%

    c. The present value of $500 due in 10 years at 6%

    d. The present value of $1,552.90 due in 10 years at 12% and at 6%

    e. Define present value and illustrate it using a time line with data from Part d. How are

    present values affected by interest rates?

    5-13 TIME FOR A LUMP SUM TO DOUBLE How long will it take $200 to double if it earns the

    following rates? Compounding occurs once a year.

    a. 7%

    b. 10%

    c. 18%

    d. 100%

    5-16 PRESENT VALUE OF A PERPETUITY What is the present value of a $100 perpetuity if the

    interest rate is 7%? If interest rates doubled to 14%, what would its present value be?
    5-17 EFFECTIVE INTEREST RATE You borrow $85,000; the annual loan payments are $8,273.59

    for 30 years. What interest rate are you being charged?

    5-19 FUTURE VALUE OF AN ANNUITY Your client is 40 years old; and she wants to begin saving

    for retirement, with the first payment to come one year from now. She can save $5,000 per

    year; and you advise her to invest it in the stock market, which you expect to provide

    an average return of 9% in the future.

    a. If she follows your advice, how much money will she have at 65?

    b. How much will she have at 70?

    c. She expects to live for 20 years if she retires at 65 and for 15 years if she retires at 70.

    If her investments continue to earn the same rate, how much will she be able to

    withdraw at the end of each year after retirement at each retirement age?

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