Module 3 - Time Value of Money Flashcards
Today, John purchased an investment-grade diamond for $60,000. He expects it to increase in value at a rate of 14%, compounded annually, for the next 6 years. how much will his diamond be worth at the end of the 6th year, if his expectations are correct?
END mode
Compounding periods - 1x/yr
Solving for - FV
Answer should be $131,698
In January 2008, Nancy loaned $10,000 to her son at 9% interest, compounded annually, and payable upon termination of the loan. What was the total amount Nancy received from her son for repayment of the loan at its termination in January of 2014?
BEG mode
Compounding periods - 1x/yr
Solving for - FV
Answer should be $16,771
Roberta wants to give her daughter $40,000 to start her own business in 9 years. How much should she invest today at an annual interest rate of 7%, compounded annually, to have $40,000 in 9 years?
END mode
Compounding periods - 1x/yr
Solving for - PV
Answer should be $21,757
Lisa has a balloon payment on her mortgage of $40,000 that is due in 4 years. If she can make the lump-sum payment today, how much should she offer if she discounts the loan at a rate of 10%, compounded annually, for 4 years?
END mode
Compounding periods - 1x/yr
Solving for - PV
Answer should be - $27,321
Mark wants to deposit a sum today that will be dissipated in 8 years. He wants to withdraw $1,200 a the beginning of every 6 month period and expects to earn annual interest of 11%, compounded semi-annually, on investments. How much does Mark need to deposit today?
BEG mode
Compounding periods - 2x/yr
Solving for - PV
Answer should be - $13,245
Assume that Karen has been investing $2,000 at the beginning of each year for the past 15 years. How much has accumulated assuming she has earned 9%, compounded annually, on her investment?
BEG mode
Compounding periods - 1x/yr
Solving for - FV
Answer should be - $64,007
Robert expects to receive $3,000 at the end of each of the next 4 years. His opportunity cost on investments is 12%, compounded annually. What is the sum worth to Robert today?
END mode
Compounding periods - 1x/yr
Solving for - PV
Answer should be - $9,112
Tony and Doris can invest $10,500 at the end of each 6 month period to accumulate funds for retirement. They plan to retire in 12.5 years and can earn 8% annual interest, compounded semi-annually, on their investments. How much will they have accumulated at retirement?
END mode
Compounding periods - 2x/yr
Solving for - FV
Answer should be - $437,282
Today, Richard invested $3,000 for his one year old daughter. He intends to use this fund for her college education in 17 years. He estimates he will need $40,000 at that time. What average annual compound rate of return will Richard need to achieve his goal?
END mode
Compounding periods - 1x/yr
Solving for - I/Yr
Answer should be - 16.46% (make sure PV is negative)
Susan invested $8,000 in a CD. when the CD matures in 6 months, she will receive $8,162. If interest is compounded monthly, what is the average annual compound rate of return on the CD?
END mode
Compounding periods - 12x/yr
Solving for - I/Yr
Answer should be - 4.02%
End mode > 12 P/Yr - 8,000 PV 8162 FV 0.5 shift N (6 compounding periods) I/Yr
Gene has received an inheritance of $125,000. He wants to withdraw periodic payments at the beginning of each month for the next five years. He expects to earn annual interest of 5%, compounded monthly, on his investments. How much can he receive each month?
BEG mode
Compounding periods - 12x/yr
Solving for - PMT
Answer should be - $2,49.11
Gina purchased a car for $14,500. She is financing the car at 7% annual interest, compounded monthly, for 3 years. What payment is required at the end of each month to finance Gina’s car?
END mode
Compounding periods - 12x/yr
Solving for - PMT
Answer should be - $447.71
Susan purchased a home for $250,000. She put $50,000 down and financed the remainder at 5% interest, compounded monthly, with a 30 year fixed mortgage. Using the amortization function, calculate the amount of principal and interest that Susan paid by the end of the first 12 months of her mortgage?
END mode
Compounding periods - 12x/yr
Solving for PMT & total interest and remaining principal after first 12 payments.
Answer should be (PMT) - $1,073.64
Answer should be (PRIN) - $2,950.73
Answer should be (INT) - $9,932.99
200,000 PV
30 Shift N
5 I/Yr
PMT ($1,073.64)
1 INPUT 12 Shift AMORT
= 2,950.73 (PRIN)
= 9,932.99 (INT)
= 197,049.27 (BAL)
