What annual interest is your friend offering

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Q1. A friend promises to pay you RM 600 two years from now if you loan him RM 500 today. What annual interest is your friend offering?

Q2. You decide to begin saving towards the purchase of a new computer in 5 years. If you put RM 1,000 at the end of each of the next 5 years in a savings account paying 6 percent compounded annually, how much will you accumulate after 5 years? What would be the ending amount if the payments were made at the beginning of each year?

Q3. Calculate the present value of RM 1,000 to be received at the end of 8 years. Assume an interest rate of 7 percent.

Q4. How much would you be willing to pay today for an investment that would return RM 800 each year at the end of each of the next 6 years? Assume a discount rate of 5 percent.

Q5. If you would like to accumulate RM 7,500 over the next 5 years, how much you must deposit at the end of each six months, starting six months from now, given a 6 percent interest rate and semi-annual compounding?

Q6. What is the effective annual percentage rate (EAR) of 12 percent compounded monthly?

Q7. Why do you think that the application of time value of money is important for financial management? Discuss.

Reference no: EM132963094

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