Question

# If you deposit \$1000 in one year, \$2000 in two years and \$3000 in three years,...

1. If you deposit \$1000 in one year, \$2000 in two years and \$3000 in three years, \$4000 in four years, \$5000 in five years. How much will you have in five years at 9 percent interest? How much in 10 years if you add nothing to the account after the fifth year?

1. a) Suppose you invest \$2500 in a mutual fund today and \$5000 in one year. If the fund pays 9% annually, how much will you have in two years?

b) Suppose you plan to deposit \$2500 into an account in one year and \$5000 into the account in three years. How much will be in the account in five years if the interest rate is 9%?

1. You are offered an investment that will pay \$1000 in year 1, \$2000 the next year, \$3000 the following year, and \$4000 at the end of the 4th year. You can earn 9% on similar investments. What is the most you should pay today for this one?

1. a) You are considering an investment that will pay you \$1,000 in one year, \$2,000 in two years and \$3,000 in three years. If you want to earn 9% on your money, how much would you be willing to pay?

 Future Value Last period= 5 Compounding rate 9.000% Year 0 1 2 3 4 5 Cash flow stream 0 1000 2000 3000 4000 5000 Compounding factor 1.539 1.412 1.295 1.188 1.090 1.000 Compounded cash flows 0.000 1411.582 2590.058 3564.300 4360.000 5000.000 FV = Sum of compounded cash flows FV= 16925.94 Where Compunding factor = (1 + rate)^(Last period-Corresponding period in years) Compounded Cashflow= Cash flow stream*compounding factor
 Future Value Last period= 10 Compounding rate 9.000% Year 0 1 2 3 4 5 Cash flow stream 0 1000 2000 3000 4000 5000 Compounding factor 2.367 2.172 1.993 1.828 1.677 1.539 Compounded cash flows 0.000 2171.893 3985.125 5484.117 6708.400 7693.120 FV = Sum of compounded cash flows FV= 26042.66 Where Compunding factor = (1 + rate)^(Last period-Corresponding period in years) Compounded Cashflow= Cash flow stream*compounding factor