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What is the future value of a five-year ordinary annuity

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Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis.

Problem 1: We sometimes need to find out how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company's sales for 2020 is $1000 and expected to grow at a rate of 10% per year, how long will it take sales to double?

Problem 2: If you invested $10,000 in an investment account and you expect it to double in 4 years, what interest rate must it earn?

Problem 3: What is the future value of a 5-year ordinary annuity of $1000 if the appropriate interest rate is 5%? What is the present value of the annuity?

Problem 4: What is the future value of $1000 after 4 years under 10% annual compounding? Semiannual compounding? Quarterly compounding? Monthly compounding? Daily compounding

Problem 5: What is the effective annual rate (EAR or EFF%)? What is the EFF% for a nominal rate of 5%, compounded semiannually? Compounded quarterly? Compounded monthly? Compounded daily?

Reference no: EM132998131

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