Finance Week 4 Questions

P2: Find the FV of $10,000 invested now after five years if the annual interest rate is 8%.

a. What would be the FV if the interest rate is a simple interest rate?

b. What would be the FV if the interest rate is compound interest rate?

P3: Determine the future values (FVs) if the $5,000 is invested in each of the following situations-

a. 5% for 10 years

b. 7% for 7 years

c. 9% for 4 years

P4: You are planning to invest $2,500 today for three years at the nominal interest rate of 9% with annual compounding.

a. What would be the future value (FV) of your investment?

b. Now assume that inflation is expected to be 3% per year over the same three-year. What would be the investment’s FV in terms of purchasing power?

c. What would be the investment’s FV in terms of purchasing power if inflation occurs at a 9% annual rate?

P5: Find the present value (PV) of $7,000 to be received one year from now assuming a 3% annual discount interest rate. Also calculate the PV if the $7,000 is received after two years.

P7: Determine the present values (PVs) if $15,000 is to be received at the end of eight years and the discount rate is 9%. How would your answer change if you had to wait 6 years to receive the $15,000?

P16: Use a financial calculator or computer software program to answer the following questions-

a. What would be the future value (FV) of $15,555 invested now if it earns interest at 14.5% for 7 years?

b. What would be the FV of $19,378 invested now if the money remains deposited for 8 years and the annual interest rate is 18%?

P17: Use a financial calculator or computer software program to answer the following questions-

a. What is the present value (PV) of $359,000 that is to be received at the end of 23 years if the discount rate is 11%?

b. How would your answer change in (a) if the $359,000 is to be received at the end of 20 years?

P19: Use a financial calculator or computer software program to answer the following questions-

a. What would be the future value (FV) of $19,378 invested now if the money remains deposited for 8 years, the annual interest rate is 18%, and invest on the investment is compounded semi-annually?

b. How would your answer for (a) change if quarterly compounding were used?