Time Value

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  • Topic: Annual percentage rate, Compound interest, Mathematical finance
  • Pages : 2 (253 words )
  • Download(s) : 221
  • Published : May 21, 2013
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* 1. Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent. *
* a. What would be the future value if the interest rate is a simple interest rate? *
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* b. What would be the future value if the interest rate is a compound interest rate?

* 2.Find the present value of $7,000 to be received one year from now assuming a 3 percent annual discount interest rate. Also calculate the present value if the $7,000 is received after two years. *

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3. Determine the future value at the end of two years of an investment of $3,000 made now and an additional $3,000 made one year from now if the compound annual interest rate is 4 percent.

4. Determine the present value now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4 percent.

5.What is the present value of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten years?

6. a. What is the annual percentage rate (APR) on a loan that charges interest of .75 percent per month?

b. What is the effective annual rate (EAR) on the loan described in (a)?
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