Time Value of Money Project
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Name _________________
1. If Mrs. Beach wanted to invest a lump sum of money today to have $100,000 when she retired at 65 (she is 40 years old today) how much of a deposit would she have to make if the interest rate on the C.D. was 5%?
a. What would Mrs. Beach have to deposit if she were to use high quality corporate bonds an earned an average rate of return of 7%.
b. What would Mrs. Beach have to deposit if she were to use common stock and earned an average rate of return of 11%.
c. What type of a problem is this? ___________
2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much
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a. What would be the principal and interest payment on the first payment?
b. What would be the principal and interest payment on the twelfth payment?
c. What type of a problem is this? ___________
6. You want to purchase a truck for $25,000 and you have $3,450 to put down. How much will your payments be if you financed the truck for 60 months at 6%?
a. How much would the payment be if rate of interest is 5% and you only financed the truck for 48 months?
b. Assuming that you would only finance the truck for 4 years, how much would you need to put down to get your payment to $450.00?
c. What type of a problem is this? ___________
7. You have $350.00 per month to spend on a car payment. If your credit union charged 7.5% interest on a used car, how much car can you purchase if you will only finance for 4 years? __________
8. If you want to purchase a home. You have $15,000 to put down. All you can afford is $1,500.00 per month and you do not want to finance for more than 15 years @ 6% interest, (your taxes will be $85.00 per month and insurance $200.00 a month), what is the amount you can pay for your home? (Show all your work)
9. You want to purchase a business with the following cash flows. How much would you pay for this business today assuming you needed a 14% return to make this deal?
a. Year 2011 $150,000 b. Year 2012 $175,000 c.
1- She takes the cash bonus and decide to invest it in a 5-year bond which rate is 6,02%.
How much would you pay for a security that pays you $500 every 4 months for the next 10 years if you require a return of 8% per year compounded monthly?
1. A condo in Orange Beach, Alabama, listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?
Claire is applying for a loan to purchase a pre‐owned car. She is told that the monthly payment for the loan
What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?
1) Establish the principal and interest amount of the monthly payment. Using the 30 year loan principal and interest amount of the payment is $1,150.92
10. You have $2,000 today and want to quadruple your money in 10 years. What interest rate must you earn?
$25,000 if invested for 18 years at a 1.72% interest rate. The stated rate of
For $1,000 financed at 5%, the factor to calculate your monthly payment is .659955739. Therefore, for $80,000 your payment is $528 per month or $6,336 per year. (Rounded)
Debbie wants to have $38,855 in her bank account 5 years from now. The account will pay 0.7% interest per month. How much money does she need to put in her bank account at the end of each month to achieve this goal?
14. Your parents spent $6,200 to buy 500 shares of stock in a new company 13 years ago. The stock has appreciated 9 percent per year on average. What is the current value of those 500 shares?
Purchasing a car is never an easy decisions but many times a car is a necessity. The scenario presented will be the following. The price of the used car is $20,000. Sales tax on this car is 8.4% of the price of the vehicle. You intend to finance the entire cost of the car and sales tax, less a down payment of $1,500. You intend to finance the car for 48 months and your car payment will be $455.12 per month. The amount financed will be the cash price subtracting the down payment. In this case, the cash price will be $20,000 and the down payment is $1,500. After subtracting these two amounts, I obtained that the amount financed will be $18,500. The installment price of the car will be $23,345.76. This amount is obtained by multiplying the amounts of financing by the monthly rate (48 x $455.12) which will equal $21,845.76 in addition you must add the down payment of $1,500 to get the total value of the car. Finance charges will be the total amount of $23,345.76 minus the cash price of $20,000.00. This will leave a finance charges to equal $3,345.76.
You want to buy a condo 5 years from now, and you can save $3,000 per year, beginning immediately. You will make 5 deposits in an account that pays 6% interest. Under these assumptions, how much will you have 5 years from today? $17,925.9
2. Interest expense of $21,716 for the first year at 5% interest implies an average one
Assume that the annual payments in the sixth year is equal to the rental payment in the fifth year ( 112.9 and 86.0) and the remainder of the lump sum values (54.6 and 17.8) is due in the seventh year. With a discount rate of 5.4%, the present values of the rental payments for the years 2006 and 2007 are as follows: