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Class Activity 2

This document contains 17 practice problems related to calculating time value of money concepts such as future value, interest rates, payments on loans, and annuities. The problems involve calculating unknown variables like interest rates, payment amounts, time horizons, and cash flows given certain inputs like principal amounts, annual/periodic contributions, interest rates, and future or target values.

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Arfa Punjani
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Download as DOCX, PDF, TXT or read online on Scribd
82 views

Class Activity 2

This document contains 17 practice problems related to calculating time value of money concepts such as future value, interest rates, payments on loans, and annuities. The problems involve calculating unknown variables like interest rates, payment amounts, time horizons, and cash flows given certain inputs like principal amounts, annual/periodic contributions, interest rates, and future or target values.

Uploaded by

Arfa Punjani
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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CLASS ACTIVITY 2

TIME VALUE OF MONEY

1. If you plan to save $300 annually for 10 years and the discount rate is 15%, what is the future
value?
2. If you want to buy a boat in 6 years that costs $1,000 and you can save $150 per year, what
interest rate would you need?
3. If you invest $1,000 per year in a stock portfolio with a return of 8%, how much would you
expect to have in 7 years?
4. How long would it take you to save $1,000 if you invested $200 per year, and the interest rate is
10%?
5. If you need $10,000 to pay for your first year of graduate school in 3 years and you get an
interest rate of 9%, how much must you invest each of the next three years?
6. If 6 years ago you invested $500 and received an interest rate of 4% (compounded monthly),
how much would you now have?
7. You borrowed $100 from a friend, who said you need to pay back $300 in 5 years, what rate are
you being charged if it is compounded weekly?
8. How many years would it take you to have $2,500 if you saved $100 each month at 15%?
9. To have $6000 in 7 years what interest rate would you need if you saved $200 every quarter?
10. How long does it take for an investment to quadruple in value if the investment yields 6% per
year (compounded monthly)?
11. What are the payments on a $40,000 loan repaid monthly for six year (r = 7%)?
12. Jim makes a deposit of $120 every week (beginning next week). The deposit is to earn interest
annually at the rate of 9 percent. How much will Jim have on deposit at the end of seven years?
13. Value an annuity of $300 per month for 7 years (r = 12.3%).
14. If a two year weekly annuity is worth $5000 and r = 9.8%, what is the weekly cash flow?
15. The type of house you would like to buy requires a down-payment of $50,000. You plan to make
that down payment six years from now. How much do you need to save per week (beginning
next week), if your money gets 7% (annually)?
16. You hope to go to graduate school, and the tuition will be $50,000 for the one-year M.B.A.
program. If you can only afford to save $3,000/quarter and the interest rate is 9%, how long will
you need to save?
17. If a perpetuity is worth $1,000 and r = 15.5%, what is the cash flow?

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