**Dr.Brandi**

Finance 301

**Time Value Assignment**

1. If Anna Maria saves $50 per month at 12 percent compounded monthly, how much will she have at the end of 20 years?

2. If Dominic Joseph wants to save $500,000 for retirement after 30 years, and he can earn 10 percent per annum, how much must he save each year?

3. If Matthew Wayne invests in a stock whose price increases from $78.35 per share to $100 per share over a five year period, what rate of interest did he earn?

4. What is the present value of a consul bond (a perpetuity) providing $5,000 per year and a rate of return of 12%?

5. Given the following cash flows, what is the present value if the applicable rate of interest is 8%?

**Year
0
1
2
3
4**

**Cash Flow
**0

$400

$250

$900

$1,925

6. Given the following cash flows, what is the future value if the applicable rate of interest is 8%?

Year

0

1

2

3

4

**
Cash Flow
**0

$400

$250

$900

$1,925

7. Mary Catherine invests $10,000 in an account each year at the beginning of each year for three years. If she earns 8% per year on her investment, what is the equivalent present value of her investment?

8. If Thomas Andrew makes a one-time deposit of $2,500 at 8% compounded quarterly for 5 years. What is the value of his investment in 5 years?

9. Using the rule of 72, approximate the following:

a.

If land in an area is increasing six percent a year, how long will it take for property values to double?

b.

If you invest your money for 12 years, at what rate must you invest to double your money?

10. If Jennifer Lee purchases a car for $2,500 and pays $1,000 down and the balance in 24 monthly payments, what will her payments be if the lender requires 12% compounded monthly?

11. If Jeffrey Martin had deposited $4,500 at 10% compounded semiannually and it grew to $15,254.24, how long was it on deposit?

12. Three years from today, Mary Rose plans to take a European vacation that will cost $3,000. She consults you, her banker, about methods of providing for the trip. Among your many plans, you explain to her that she can deposit a single amount today and allow it to collect interest for three years so that the account equals $3,000 in three years. Assuming that your bank pays 6-percent interest rate compounded semiannually, how much must Mary Rose deposit now?

13. Find the compound value of a $125, ten-year ordinary annuity at 6 percent annual interest if the payment at the end of year 6 is omitted.

125 125 125 125 125 0 125 125 125 125

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t0

t6

t10

14. A father is planning to provide a 20-year trust fund for his son Dominic. The amount deposited today will remain untouched until the end of the 20th year, but will gain interest at a rate of 8 percent compounded annually. The money will then be transferred to another account, which pays 6 percent. The intent is that Dominic will withdraw the money in six equal annual payments of $4,000 each beginning at the end of year 20. The fund, which will help to pay for his higher education will be completely depleted after six payments. What amount should Dominic’s father deposit today?

4k 4k 4k 4k

4k

4k

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t0

t20

t25

15. Tom and Karen Sammie need to take out a loan for $3,000. If their bank agrees to lend them the money at 10% per annum and they make 3 annual payments beginning one year from the lending date, what is the amount of each payment and prepare an amortization schedule to show the loan payoff schedule.