Question

**Time Value of
Money**

The following situations test your comprehension of time value of money concepts. You will need your financial calculator. For each problem write the variable from the problem next to the variable in your calculator menu. Put a question mark next to the variable we are solving for, and put the answer to that variable on the “Answer” line. Remember that there has to be a negative number in your calculations for the formulas to work. If you get an error message on your calculator go back and make dollar variable negative.

- Paulo has won the lottery. He is offered a series of payments of $1,200 per year for 20 years. What is the present value of these payments at an interest/discount rate of 6%?

PV =

FV =

I =

N =

Pmt =

**Answer:
___________**

- Keesha’s grandmother died and left a trust for her that pays out $3,500 per year for 10 years. If Keesha invests the payments at 6%, what will her future value be?

PV =

FV =

I =

N =

Pmt =

**Answer:
___________**

- Bob has been in an accident and the other party’s insurance company has offered either a one-time payout of $15,000, or a series of payments of $1,100 per year for 15 years. If Bob knows that the current investment rate of interest is 6%, what is the present value of the series of payments? Which should Bob take based on present values?

PV =

FV =

I =

N

Pmt =

**Answer:
________**

- You want to buy a new car that costs $25,000. How much would your monthly payments be if you borrow the money for 5 years from a credit union at 4% annually (remember you make monthly payments so you have to get the term of the loan and the interest rate from annual periods to months)?

PV =

FV =

I =

N =

Pmt =

**Answer:
________**

- You want to buy a house that costs $145,000, and because you have a good credit score you have been offered a 20 year loan at 3.75%. What is your monthly payment?

PV =

FV =

I =

N =

Pmt =

**Answer:
________**

Answer #1

- Paulo has won the lottery. He is offered a series of payments of $1,200 per year for 20 years. What is the present value of these payments at an interest/discount rate of 6%?

PV = ?

FV = 0

I = 6

N = 20

Pmt = 1,200

**Answer: -3,990.61214**

- Keesha’s grandmother died and left a trust for her that pays out $3,500 per year for 10 years. If Keesha invests the payments at 6%, what will her future value be?

PV = 0

FV = ?

I = 6

N = 10

Pmt = 3,500

**Answer: -46,132.7823**

- Bob has been in an accident and the other party’s insurance company has offered either a one-time payout of $15,000, or a series of payments of $1,100 per year for 15 years. If Bob knows that the current investment rate of interest is 6%, what is the present value of the series of payments? Which should Bob take based on present values?

PV = ?

FV = 0

I = 6

N = 15

Pmt = 1,100

**Answer: -10,683.47389**

**Bob should take the one time payment of $15,000 as it is
greater than the PV of annual payments.**

- You want to buy a new car that costs $25,000. How much would your monthly payments be if you borrow the money for 5 years from a credit union at 4% annually (remember you make monthly payments so you have to get the term of the loan and the interest rate from annual periods to months)?

PV = 0

FV = 25,000

I = 4/12 = 0.3333333333

N = 5*12 = 60

Pmt = ?

**Answer: -377.079718**

- You want to buy a house that costs $145,000, and because you have a good credit score you have been offered a 20 year loan at 3.75%. What is your monthly payment?

PV = 145,000

FV = 0

I = 3.75/12 = 0.3125

N = 20*12 = 240

Pmt = ?

**Answer: -859.6880567**

**Can you please upvote? Thank You :-)**

Time Value of Money
Overview: In corporate finance, students need
to be able to calculate present and future values of
investments.
Purpose: The purpose for this project is to
demonstrate an understanding of how to calculate present and future
values.
Requirements: Review the examples then answer
all of the questions below.
Example 1: What is the present value of the
$800 to be received 10 years from now discounted back to the
present at 10%.
Use your financial calculator to...

1. Time Value of Money:
You are saving up for retirement and are able to save $9,000 per
year.
a. Suppose you can earn 8.5% on your investment. How much will
you have after 30 years?
PV =
FV =
N =
PMT =
I =
b. How much would you have if you work for an additional 5
years?
PV =
FV =
N =
PMT =.
I =
c. How much will you have to save per year...

Write the answers in the space allotted. Partial credit will be
given
1. Time Value of Money:
You are saving up for retirement and are able to save $9,000 per
year.
a. Suppose you can earn 8.5% on your investment. How much will
you have after 30 years? PV = FV = N = PMT = I =
b. How much would you have if you work for an additional 5
years? PV = FV = N = PMT =....

1. Julia purchased an investment grade gold coin today for
$375,000. She expects it to increase in value at a rate of 4.5%
compounded annually for the next 6 years. How much
will the coin be worth at the end of the sixth year?
N
I/Y
PV
PMT
FV
2. Moon has been investing $2,500 quarterly for the past 10
years in an equity mutual fund. How much is the fund worth now
assuming she has earned 8.5% compounded...

The purpose of this assignment is to solidify your understanding
on the applications of the time value of money. The scores of this
assignment will help in assessing the following learning goal of
the course: “students successfully completing this course will be
able to apply principles of time value of money to personal and
corporate financial decisions.” Instructions: You are required to
use a financial calculator or spreadsheet (Excel) to solve 10
problems (provided on page 3) on the applications...

You are required to use a financial calculator or spreadsheet
(Excel) to solve 10 problems (provided on page 5) on the
applications of the time value of money. You are required to show
the following four steps for each problem (sample problems and
solutions are provided for guidance): (i) Develop a timeline
(linear representation of the timing of cash flows). (ii) Identify
the time value of money variable (PV, FV, PMT, N, or I/YR) that
needs to be solved/calculated in...

How many years does it take for $1,000 grow to be
$1,500, if interest rate is 12% compounded monthly?
BGN or END MODE ( choose one ) P/Y =
N= ?
I/Y=
PV=
PMT=
FV=
CPT , N =
Can you explain how you computed it for compunded monthly.
2. How many years does it take for $1,000 to grow to be
$1,500, if interest rate is 12%?
BGN or END MODE ( choose one ) P/Y =
N= ?...

You have purchased a home for $200,000 with a down payment of 10
percent. Prevailing mortgage interest rates are 4.5 percent. If you
finance the home for 30 years, what is your monthly payment?
N
I/Y
PV
PMT
FV
If you finance it for 20 years, what
is your monthly payment?
N
I/Y
PV
PMT
FV
If you finance it for 15 years, what
is your monthly payment?
N
I/Y
PV
PMT
FV
Assuming you choose a 20-year payment
period...

Xanth Co. has 4.3% annual coupon bonds with face value of $1,000
and 7 years remaining until maturity. The bonds are priced to yield
7.3%. What is the present value of the bonds face value to be
repaid at maturity (do not include the coupon payments)?
Round your answer to two decimal places.
(Please solve using N, I/Y, PV, PMT, and FV on a financial
calculator)

What would be the future value of $15,555 invested now if it
earns interest at 14.5 percent for seven years? Using a financial
calculator, enter 15555 and press PV, enter 14.5 and press %i, and
enter 7 and press N. Then, press CPT and FV which gives an answer
of 40133.63 or $40,133.63. Using Excel, click financial wizard,
then FV, enter 0.14 for rate, 7 for nper, 0 for pmt, 15,555 for PV,
0 for type. Press enter answer is...

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