Finc 5000 Homework Assignment for Week 2:

FINC 5000 Homework Assignment for Week 2:


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1-What is it necessary to know about itme value of money of money consptes?why can’t you just make about future cash flows based purely on the size of the cash flow?
2-Define future value
3-Define present value
4.What are annuities?
5. (calculating future value) You buy an 7 year, 8% CD for $1,000. Interest is compounded annually. How much is it worth at maturity?
6. (calculating present value) What's the present value of $10,000 to be received in 5 years? (Your required rate of return is 8% a year.)
7. (calculating the rate of return) A friend promises to pay you $600 three years from now if you loan her $500 today. What interest rate is your friend offering you?
8. (calculating the future value of an annuity) If you invest $100 a year for 20 years at 5% annual interest, how much will you have at the end of the 20th year?

9. (calculating the present value of an annuity) How much would you be willing to pay today for an investment that pays $700 a
year at the end of the next 5 years? (Your required rate of return is 8% a year.)

10. (Rate of return of an annuity) You would like to have $1,000,000 40 years from now, but the most you can afford to invest each year is $1,200.
What annual rate of return will you have to earn to reach your goal?

11. (Monthly compounding) If you bought a $1,000 face value CD that matured in nine months, and which was advertised as paying 6%
annual interest, compounded monthly, how much would you receive when you cashed in your CD at maturity?

12. (Annualizing a monthly rate) Your credit card statement says that you will be charged 1.02% interest a month on unpaid balances.
What is the Effective Annual Rate (EAR) being charged?

13. (Monthly loan payment) Best Buy has a flat-screen HDTV on sale for $1,699. If you could borrow that amount from Carl's Credit...