Reference no: EM131413557
1- For each of the following, compute the future value:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
2,950
|
|
|
10
|
|
|
12
|
%
|
|
|
$
|
|
|
|
|
8,853
|
|
|
23
|
|
|
10
|
|
|
|
|
|
|
|
|
93,305
|
|
|
17
|
|
|
5
|
|
|
|
|
|
|
|
|
231,382
|
|
|
33
|
|
|
3
|
|
|
|
|
|
2- For each of the following, compute the present value:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
$
|
|
|
10
|
|
|
6
|
%
|
|
|
$
|
19,128
|
|
|
|
|
2
|
|
|
11
|
|
|
|
|
43,317
|
|
|
|
|
14
|
|
|
14
|
|
|
|
|
808,382
|
|
|
|
|
19
|
|
|
13
|
|
|
|
|
665,816
|
|
3- Solve for the unknown interest rate in each of the following:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
780
|
|
|
7
|
|
|
|
%
|
|
|
$
|
1,511
|
|
|
|
|
970
|
|
|
8
|
|
|
|
|
|
|
|
1,848
|
|
|
|
|
21,500
|
|
|
19
|
|
|
|
|
|
|
|
148,332
|
|
|
|
|
76,800
|
|
|
22
|
|
|
|
|
|
|
|
325,815
|
|
4- Solve for the unknown number of years in each of the following:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
850
|
|
|
|
|
|
11
|
%
|
|
|
$
|
1,705
|
|
|
|
|
2,541
|
|
|
|
|
|
9
|
|
|
|
|
4,300
|
|
|
|
|
34,005
|
|
|
|
|
|
14
|
|
|
|
|
393,120
|
|
|
|
|
33,700
|
|
|
|
|
|
21
|
|
|
|
|
216,356
|
|
5- Imprudential, Inc., has an unfunded pension liability of $766 million that must be paid in 30 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present.
If the relevant discount rate is 9 percent, what is the present value of this liability?
6- Although appealing to more refined tastes, art as a collectible has not always performed so profitably. Assume that in 2015, an auction house sold a statute at auction for a price of $10,395,500. Unfortunately for the previous owner, he had purchased it in 2011 at a price of $12,453,500.
What was his annual rate of return on this sculpture?
7- You have just made your first $4,500 contribution to your individual retirement account. Assume you earn an annual return 11.0 percent and make no additional contributions.
What will your account be worth when you retire in 45 years?
What if you wait 10 years before contributing?
8- You need $84,000 in 8 years.
If you can earn .51 percent per month, how much will you have to deposit today?
9- For each of the following, compute the future value:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
2,600
|
|
|
7
|
|
|
17
|
%
|
|
|
$
|
|
|
|
|
9,553
|
|
|
20
|
|
|
9
|
|
|
|
|
|
|
|
|
100,305
|
|
|
14
|
|
|
10
|
|
|
|
|
|
|
|
|
238,382
|
|
|
30
|
|
|
4
|
|
|
|
|
|
10- For each of the following, compute the present value:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
$
|
|
|
10
|
|
|
5
|
%
|
|
|
$
|
17,528
|
|
|
|
|
2
|
|
|
11
|
|
|
|
|
41,717
|
|
|
|
|
14
|
|
|
13
|
|
|
|
|
792,382
|
|
|
|
|
19
|
|
|
13
|
|
|
|
|
649,816
|
|
11- Solve for the unknown interest rate in each of the following:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
780
|
|
|
7
|
|
|
|
%
|
|
|
$
|
1,511
|
|
|
|
|
970
|
|
|
8
|
|
|
|
|
|
|
|
1,848
|
|
|
|
|
21,500
|
|
|
19
|
|
|
|
|
|
|
|
148,332
|
|
|
|
|
76,800
|
|
|
22
|
|
|
|
|
|
|
|
325,815
|
|
12- Solve for the unknown number of years in each of the following:
|
Present Value
|
Years
|
Interest Rate
|
Future Value
|
|
|
$
|
300
|
|
|
|
|
|
10
|
%
|
|
|
$
|
1,155
|
|
|
|
|
1,991
|
|
|
|
|
|
8
|
|
|
|
|
3,750
|
|
|
|
|
32,905
|
|
|
|
|
|
13
|
|
|
|
|
387,620
|
|
|
|
|
32,600
|
|
|
|
|
|
20
|
|
|
|
|
199,724
|
|
13- Assume the total cost of a college education will be $350,000 when your child enters college in 17 years. You presently have $56,000 to invest.
What annual rate of interest must you earn on your investment to cover the cost of your child's college education?
14- You're trying to save to buy a new $210,000 Ferrari. You have $35,000 today that can be invested at your bank. The bank pays 4.2 percent annual interest on its accounts.
How long will it be before you have enough to buy the car?
15- Imprudential, Inc., has an unfunded pension liability of $758 million that must be paid in 15 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present.
If the relevant discount rate is 7 percent, what is the present value of this liability?
16- Although appealing to more refined tastes, art as a collectible has not always performed so profitably. Assume that in 2015, an auction house sold a statute at auction for a price of $10,437,500. Unfortunately for the previous owner, he had purchased it in 2009 at a price of $12,491,500.
What was his annual rate of return on this sculpture?
17- You have just made your first $4,000 contribution to your individual retirement account. Assume you earn an annual return 10.9 percent and make no additional contributions.
What will your account be worth when you retire in 42 years?
What if you wait 10 years before contributing?
18- You need $78,000 in 9 years.
If you can earn .45 percent per month, how much will you have to deposit today?