Reference no: EM132641689

1. If you deposit $10,000 in a bank that pays 10% interest annually, how much money will be in your account after five years?

2. What is the present value of a security that promises to pay you $5,000 in 20 years? Assume you can earn 7% if you were to invest in other securities of equal risk.

3. What is the future value (in 7 years' time) of an initial $88,000 deposit that accrues 5% interest annually?

4. The director of sport marketing of your organization asks for your advice regarding sponsorship deals she is contemplating. She has to choose between the following: (1) a 15-year sponsorship paying $100,000 per year; (2) a 15-year sponsorship initially paying $75,000 per year and increasing 5% each year; and (3) a 15-year sponsorship initially paying $45,000 per year, but increasing 12% each year. Based on this information, address the following:

a. Determine the value of each year for each proposal, as well as the total value of each proposal. Hint: you should have a table that has 3 columns (one for each proposal) and is 16 rows high (one for each of the 15 years and one at the bottom that is a total of all 15 years).

b. Which proposal should the marketing director choose and why?

5. This past year, there was $400,000 in parking revenue from University of Illinois Football and Men's Basketball games. You, as the athletics director, have to split that revenue 50/50 with University of Illinois Endowment. If you take the athletics department share of the revenues and invest it for 3 years with a guaranteed 5% annual return, what is the future value of the money you invested at the end of 3 years?