What is the present value of the future amounts

Assignment Help Financial Management

Reference no: EM131974549

1. Compound Interest To what amount will the following SAR investments accumulate? Solution

A) Investment 4,500 Years 5 Percent 7% FV =

B) Investment 9,200 Years 3 Percent 9% FV =

C) Investment 17,050 Years 8 Percent 11% FV =

D) Investment 925 Years 15 Percent 7% FV =

2. Present Value What is the present value of the following future amounts?

A) FV 3,550 Years 5 Percent 13% PV =

B) FV 250 Years 3 Percent 8% PV =

C) FV 2,700 Years 5 Percent 9% PV =

D) FV 3,025 Years 7 Percent 15% PV =

3. Future Value Sales of a new business book were 15,500 copies this year and were expected to increase by 14 percent per year. What are expected sales during each of the next 3 years?

DATA Copies 15,500 Percent 13.5% Years 9 Solution

FV for 1st yr =

FV for 2nd yr =

FV for 3rd yr =

4. Present-Value Comparison Assuming you can earn 5 percent on your money, which of the following offers should you choose? SAR 950 today; SAR 11,000 in 13 years; or SAR 24,000 in 21 years?

Solution Percent 5% Years Amount PV A Today 950 B 13 12,500 C 21 24,000 Which offer should you choose and why?

5. Compound Annuity What is the accumulated sum of each of the following streams of payments?

a. SAR 1,100 a year for 5 years compounded annually at 7 percent

b. SAR 1,350 a year for 4 years compounded annually at 10 percent

c. SAR 225 a year for 3 years compounded annually at 9 percent

d. SAR 400 a year for 7 years compounded annually at 3 percent Solution

A) Pymt 1,100 Years 5 Percent 7% FV =

B) Pymt 1,350 Years 3.25 Percent 10% FV =

C) Pymt 225 Years 3 Percent 9% FV =

D) Pymt 400 Years 7 Percent 3% FV =

6. Compound Interest with Nonannual Periods

a. Calculate the future sum of SAR 5,500, given that the money will be held in the bank for 4 years at an annual interest rate of 3 percent.

b. Recalculate part a. assuming the interest rate is (1) an APR of 4 percent compounded semiannually and (2) an APR of 8 percent compounded bimonthly.

c. Recalculate parts a. and b. for an APR of 9 percent

d. Recalculate part a. using a time horizon of 14 years (the APR is still 3 percent). e. With respect to the effect of changes in the stated interest rate and holding periods on future sums in parts

c. and d., what conclusions do you draw when you compare these figures with the answers found in parts a. and b.? Solution

A) PV 5,500 Years 4 Percent 3% FV =

B) Semiannual 4 Bimonthly 8

C) Rate 9% Annual Semiannual Bimonthly

D) Years 14 Annual

Reference no: EM131974549

Questions Cloud

Advantages and disadvantages of the new pos system : HC1041 IT for Business Assignment -What are the advantages and disadvantages of the new POS system and How will this POS system help the business gain advantage

What is the unified data architecture : What is the Unified Data Architecture? What are its components? How does the Unified Data Architecture help leverage Big Data?

According to the unbiased expectations hypothesis : According to the unbiased expectations hypothesis, what are the expected one-year rates for year 4, 5, and 6 (i.e., what are 4f1, 5f1, and 6f1)?

Decision payoff table with future demand probabilities : Given is a decision payoff table with future demand probabilities.

What is the present value of the future amounts : Present Value What is the present value of the following future amounts?

Prepare a change management plan : Prepare a change management plan on the implementation of proposed improvements: How can the buy-in of the current organization

Analyze level of self-disclosure in the same-sex friendship : Analyze the level of self-disclosure in the same-sex friendship in relation to the level in the opposite-sex friendship.

Values of their superannuation accounts at retirement : What are the accumulated values of their superannuation accounts at retirement?

Explain what did you learn from the experience : Participate in US cultural activity or event. What did you experience and observe about American culture? Explain what did you learn from the experience?

User Account

All Pages