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? * * * * * * 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
Premium Compound interest
TIME VALUE OF MONEY 1. If you were scheduled to receive Rs 100‚000 five years hence‚ but you wish to sell your contract note for its present value‚ which type of compounding would you rather have the purchaser of your contract note to use to find the purchase price‚ 8 percent compounded: (a) (b) (c) (d) (e) Continuously Quarterly Semi-annually Annually None of the above 2. According to the rule of 69‚ the doubling period is equal to (a) (b) (c) (d) (e) 0.25 + (69/ Interest rate) 0.35 + (69/ Interest
Premium Net present value Investment Stock
TIME VALUE Time Value • Interest Rates • Compounding • Discounting • Effective Rates • Annuities • Perpetuities 2 Interest Rates • Types – Bank rate vs. Prime rate – Mortgage rates – Deposit‚ Loan‚ Credit rates • Movement – Demand / Supply – Inflation/ Deflation – Government intervention 3 Main Components 1. Real 2. Inflation 3. Risk *Note: - Risk Free (Rf) = Real + Inflation - Nominal = Rf + Risk Premium 4 Risk Free & Real Rate • Risk Free (Rf) = Real +
Premium Time value of money Compound interest Future value
The value of Time The value of time is limitless‚ it cannot be measured. The value of time arises from the fact that human life is short but he has to do a lot of works within the short span of time. Each work requires some time. If the work is not finished in time‚ it may not be finished at all. That explains why time is so valuable and it should not be lost for nothing. Tome goes on like the tide of a river and it never waits for anybody. Lost time can never be found again. Misuse of time
Premium Management Time Education
you deposit $10‚000 in a bank account that pays 10 percent interest annually‚ how much money will be in your account after 5 years? 2. What is the present value of a security that promises to pay you $5‚000 in 20 years? Assume that you can earn 7 percent if you were to invest in other securities of equal risk. 3. If you deposit money today into an account that pays 6.5 percent interest‚ how long will it take for you to double your money? 4. Your parents are planning to retire in 18 years.
Premium Money Interest rate Time value of money
Fall 2011 Time Value of Money Problems Calculating Future Values Assume you deposit $10‚000 today in an account that pays 6% interest. How much will you have in five years? = $10‚000 (FVIF of 6%‚ 5years) = $10‚000 * 1.3382 = $13‚382 Calculating Present Values Suppose you have just celebrated your 19th birthday. A rich uncle has set up a trust fund for you that will pay you $150‚000 when you turn 30. If the relevant discount rate is 9%‚ how much is the fund worth
Premium Time value of money Net present value Future value
deposit today that earns an annual interest rate of 10% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year. 2) An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment? 3) Which of the following investments has a larger future value? A $100 investment earning 10% per
Premium Money Investment Bond
The “value of time” according to transport economics refers to the opportunity cost of the time that voyager spend on their journey. In other words‚ it is the amount that a traveler would be willing to pay in order to save time‚ or the amount they would accept as compensation for lost time. It’s a known fact that one of the main reasons behind the transport improvements is the amount of time that travelers can save. Using a set of values of time‚ the economic benefits of a transport project can be
Premium Economics Utility Econometrics
Assignment no. : One Time value of money Please solve the attached problems Date of Submission: Monday 10/09/2012 Please: No Late Submission Solved By Sherin Ezant 1. Accumulating a growing future sum A retirement home at Deer Trail Estates now costs $ 185‚000. Inflation is expected to cause this price to increase at 6% per year over the 20 years before G.L. Donovan retires. How large an equal‚ annual‚ end-of-year
Premium Time value of money Money Mortgage loan
PREPOSITIONS WHAT ARE PREPOSITIONS? Prepositions are words that demonstrate association between a noun or pronoun and another word‚ that is‚ to show how they are joined with some other word in a sentence. Examples: 1. The book is on the bed. 2. The book is under the bed. The various prepositions‚ on and under‚ used before the noun bed show the different positions of the book with regard to the bed. It shows the relation between the book and the bed. This is the function of Preposition
Premium Time Inequality