Time value of money comparises computing future value

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Q1 Time value of money comparises computing future value of investment

Chuck is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the investment in 10 years?

Q2 Time value of money involves calculation of interest rate.

Patrick has $2400 that he is looking to invest. His brother approached him with an investment opportunity that can double his money in four years. What interest rate would the investment have to yield in order for Patrick\'s brother to deliver on his promise.

Q3 Time value of money involves calculation of present value of money.

Discounted Cash Flow and Valuation

Growing perpetuity: You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $20,000 at the end of this year and subsequent payments will thereafter grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investment products, what is the present value of this growing perpetuity?

Q4 Time value of money involves calculation of payment

Discounted Cash Flow and Valuation

Computing annuity payment: Gary Whitmore is a high school sophomore. He currently has $7500 in a savings account that pays 5.65 percent annually. Gary plans to use his current savings plus what he can save over the next four years to buy a car. He estimates that the car will cost $12,000 in four years. How much money should Gary save each year if he wants to buy the car?

Reference no: EM1312437

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