Fin 3101 The Time Value of Money Guaranteed A+
What is the value of a bond that never matures that will generate an annual coupon of $100 assuming
your required return is 12%? ️$833.33
PV=CF(Csh flow)/r(return)
PV=$100/0.12=$833.33
How much will you accumulate in an account where you de...
Fin 3101 The Time Value of Money Guaranteed A+
What is the value of a bond that never matures that will generate an annual coupon of $100 assuming
your required return is 12%? ✔️$833.33
PV=CF(Csh flow)/r(return)
PV=$100/0.12=$833.33
How much will you accumulate in an account where you deposit $800 a year at the end of the next 4
years if you can earn 3% annually? ✔️$3346.90
FV=PMTx(1+r)n!/r
FV= future value
PMT= the annuity payment deposited or received at the end of the period
r= interest rate
n=number of periods
FV=$800x(1+0.03)4!-1/0.03= $3346.90
Jim is considering buying a car that costs $20,000 that can be financed for 5 years at 6% interest with no
down payment. How much will Jim's payment be per month? ✔️$386.65
PV=$20,000; N=60; I/Y=.5; FV=0; CPT PMT=$386.65
With a(n)______ loan you pay off the entire principal and the accumulated interest with one payment
when the loan matures ✔️discount
Langston knosws he can make a car payment of $400 per month for the next 5 years. What is the
maximum amount he can finance without exceeding his payment goal if interest rates are 3%?
✔️$22,261
Elizabeth wants to have $500,000 for retirement in 20 years. Assuming she can earn an 8% annual
return on her investments how much will she need to save at the end of each of the next 20 years to
accomplish her goal? ✔️$10,926.10
FV=500,000; N=20; I/Y=8; PV=0; CPT PMT=-10,926.10
Candi is saving for retirement by placing $1000 in savings account twice a year. The savings account pays
12% interest compounded semiannually. If Candi continues to do this for 30 years, how much will she
have saved? ✔️$533,128
PMT=-$1000; N=30x2=60; I/Y=12%/2=6; PV=0; CPT FV
Saleh needs to save $34,000 for a down payment on a house. How long will it take him to reach his goal
if he is saving $4200 per year and is earning a 9% return on his investments? Assume he will make the
first savings installment at the end of the next 12 months. ✔️6.4 years
FV=34,000; PMT=-4200; I/Y=9; PV=0; CPT N=6.351
Mario won the lottery and is receiving payment of $1,521,875 a year for the next 19 years. However, he
has decided to sell this income stream and has been offered $9,968,843 for the remaining lottery
payments. What is the discount rate used by the potential buyer? ✔️14%
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