Question

How much money would you have in a year if you put $1,000 in the bank at an annual interest rate of 3 percent? How much would you have if you left all of that money in the bank for another year and annual interest rates increased to 4 percent in the second year?

How much would you loan your brother-in-law if he said he could repay you $100 in six months, $200 in a year, and $500 in two years if you can get 2 percent interest from the bank on a six month CD? Show that you are in fact indifferent between the loan and putting your money in the bank for the next two years.

What is the present value of an asset that pays $10,000 per year at the end of the next four years if the appropriate discount rate is 5 percent? What total return would you earn if you bought this asset and it paid its expected cash flows on time each year for the next four years? Prove that you earned the same return that you would have, had you put your money in the bank for four years at 5 percent per year.

What is the net present value of a project that has upfront costs of $5 million and pays end of the year cash flows of $1 million in one year, $2 million in two years, and $3 million in three years if the annual discount rate for the project is 3 percent? Show how much money you would have at the end of three years if you bought the project and what you would have instead if you banked your $5 million for three years at 3 percent.

Your agency is competing with another agency for $15 million in government money. Only one of you will get the $15 million. Your agency will use the $15 million for vocational training that will increase the skills and earning power of 100 people in about two years when they finish the program. The other agency will use the $15 million to study how floods affect homeowners’ insurance costs. Their study will take four years but it will create twice as much value as your agency’s project at the end of that time. The government uses a 4 percent discount rate for both projects. Who will get the $15 million?

Calculate the Net Present Value of a project that has upfront costs of $124,000 and end-of-year annual cash flows of $30,000 for five years, if the appropriate discount rate is 6.5 percent. Suppose that discount rate is the borrowing cost for the project. Show that this project’s cash flows can pay off a loan with an annual interest rate of 6.5 percent over the next five years.

Would you suggest your firm invest in a new machine that costs $450,000 and generates cash flows of $60,000 per year at the end of each of the next ten years if the appropriate discount rate for the machine is 8 percent? What is the present value of the annuity generated by this machine’s cash flows?

Calculate the internal rate of return for a project that has upfront costs of $6 million and cash flows of $2 million per year for each of the next four years. Suppose the risk adjusted borrowing cost of this project is 15 per-cent. Using IRR analysis, would you undertake this project? Confirm your answer by calculating the project’s NPV.

Answer #1

As per guidelines I am answering 1st question I.e.

How much money would you have in a year if you put $1,000 in the bank at an annual interest rate of 3 percent? How much would you have if you left all of that money in the bank for another year and annual interest rates increased to 4 percent in the second year?

FV = PV (1+r)^n

= 1000(1+0.03)^1

= 1000(1.03)

Therefore money we have in a year = $1030

If we left the money for another year earning 4% interest

FV = 1030(1+0.04)^1

= 1030(1.04)

Therefore money we have after year 2 = $1071.20

Using the formula, determine how much money you would have if you
put 1,000 in the bank at an interest rate of 7% and kept it
there for
5 years.
Answer
Using the
formula, determine how much money you need to put into the bank to
have $1,500 in 4 years if the interest rate is 5%.
Answer
Using
the calculator answer the following questions.
How much
money would you have in the bank if you deposited $50 at an...

Calculate the present value of the following cash flows given a
discount rate of 12%:
Year 1
Year 2
Year 3
Year 4
Cash Flows
$1,500
$8,500
$12,500
$11,000
Calculate the internal rate of return for a project that has
upfront costs of $7 million and cash flows of $2.5 million per year
for each of the next four years. The risk adjusted project discount
rate is 12%.

How much money would you have to deposit today in order to have
$5,000 in four years if the discount rate is 7 percent per year?
(Do not round intermediate calculations. Round your answer to 2
decimal places. (e.g., 32.16)) Amount of deposit

8 You are considering a project which will provide annual cash
inflows of $4,500, $5,700, $10,000, and 24,000 at the end of each
year for the next four years, respectively. What is the present
value of these cash flows, given a 10.35 percent discount rate?

Starting one month from now, you need to withdraw
$250 per month from your bank account to help cover the costs of
your university education. You will continue the monthly
withdrawals for the next four years. If the account pays
0.2% interest per month, how much money must you have in your bank
account today to support your future needs?
How much money must you have in your bank account today to support
your future needs?
$
(Round to the...

TVM:
1. You are interested in saving money for your first house. Your
plan is to make regular deposits into a brokerage account that will
earn 14 percent. Your first deposit of $5,000 will be made today.
You also plan to make four additional deposits at the beginning of
each of the next four years. Your plan is to increase your deposits
by 10 percent a year. (That is, you plan to deposit $5,500 at t =
1, and $6,050...

How much would you have to deposit today if you want to have
$1,000 in five years and the annual interest rate is 5%?
You plan to buy a house today for $220,000. If the real estate
in your area is expected to increase in value by 2% each year, what
will be the approximate value of your house in 7 years?
How much would you have to deposit today to be able to withdraw
$500 each year for the...

Intermediate
1. Multiple compounding periods: Find the future value of an
investment of $2,500 made today for the following rates and
periods:
a.
6.25 percent compounded semiannually for 12 years
b.
7.63 percent compounded quarterly for 6 years
c.
8.9 percent compounded monthly for 10 years
d.
10 percent compounded daily for 3 years
2. Multiple compounding periods: Find the present value of
$3,500 under each of the following rates and periods.
a.
8.9% compounded monthly for five years.
b. ...

11.) If you put $10,000 in the bank today, how much would you
have after 4 years if you earned 3% compounded monthly?
A.
$11,255.09
B.
$10,940.51
C.
$10,927.27
D.
$11,273.28
E.
None of the given choices.
12.) If you save $3,000 a year, and earn 6.5% interest annually,
how much will you have in your account after 25 years?
$101,478.92
$188,146.13
$79,875.00
$176,663.04
13.) If your credit card company tells you that the interest
rate is 19.0%, what is...

1) How much money will you accumulate by the end of 30 years if
you invest $200 per month and you start out with $30 000 in the
bank? Assume the interest rate your money earns is 8% per year and
you start saving next month.
a) $55 505
b) $30 000
c) $628 131
d) $626 144
2) How much is the monthly payment on a $250 000 loan for 15
years at 10% interest per year? Assume first...

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