1. The appropriate discount rate for the following cash flows is 6 percent compounded quarterly. |
Year | Cash Flow |
1 | $900 |
2 | 600 |
3 | 0 |
4 | 1,100 |
Required:
What is the present value of the cash flows? |
A. $2,202.3
B. $2,254.36
C. $2,247.24
D. $1,129.24
E. $2,292.19
2. What is the future value of $500 in 23 years assuming an interest rate of 9 percent compounded semiannually? |
A. $665.56
B. $3,787.21
C. $3,628.94
D. $3,597.85
E. $594.59
3. You deposit $1,300 at the end of each year into an account paying 8.6 percent interest. |
Required: | |
(a) | How much money will you have in the account in 23 years? |
A.97,968.60 B. 29,900.00 C. 85,700.05 D. 27,875.20 E. 75,111.95 |
(b) | How much will you have if you make deposits for 46 years? |
A. 480,052.52 B. 59,800.00 C. 657,266.93 D. 70,392.29 E. 904,701.30 |
Answer 1.
Annual Interest Rate = 6%
Quarterly Interest Rate = 1.5%
Present Value = $900/1.015^4 + $600/1.015^8 + $0/1.015^12 +
$1,100/1.015^16
Present Value = $2,247.24
Answer 2.
Present Value = $500
Semiannual Period = 46 (23 years)
Annual Interest Rate = 9%
Semiannual Interest Rate = 4.5%
Future Value = $500 * 1.045^46
Future Value = $3,787.21
Answer 3-a.
Annual Deposit = $1,300
Annual Interest Rate = 8.6%
Period = 23 years
Accumulated Sum = $1,300 * FVIFA(8.6%, 23)
Accumulated Sum = $1,300 * (1.086^23 - 1) / 0.086
Accumulated Sum = $85,700.05
Answer 3-b.
Annual Deposit = $1,300
Annual Interest Rate = 8.6%
Period = 46 years
Accumulated Sum = $1,300 * FVIFA(8.6%, 46)
Accumulated Sum = $1,300 * (1.086^46 - 1) / 0.086
Accumulated Sum = $657,266.93
Get Answers For Free
Most questions answered within 1 hours.