Assignment:
Using the time value of money concepts, offer guidance, include the following in your answer.
1-What TVM concept(s) is represented in the situation?
2-What is the value of the money represented by the situation?
3- How did you arrive at the value?
Question 1:
I have $10,000 cash to invest with a bank offering a 4% interest rate. I am not sure if I should invest the cash with the interest compounded quartely, semi-annually, or annually.
CALCULATE AND SHOW THE ENDING BALANCE ONLY AT THE END OF 5 YEARS using all 3 situations.
Question 2:
A loan is offered to a customer with a 4% interest rate for $40,000 five year note receivable. CALCULATE AND REFLECT THE BALANCE AT THE END OF 5 YEARS ONLY.
Question 3:
I would like to retire in 15 years. My life expectancy upon retirement is 17 years and I will need $60,000 a year to live comfortably. Use a discount rate of 6%. CALCULATE AND SHOW THE ENDING BALANCE ONLY.
Question 4:
A balloon payment of $150.000 is due in 5 years. I can either make payments into a fund at the beginning of the year or at the end of the year. The discount rate is 6%. CALCULATE BOTH SITUATIONS AND SHOW ENDING AMOUNTS AT THE END OF THE YEAR AND AT THE BEGINNING OF THE YEAR.
Question 5:
I won the lottery for $5,000,000. I can take the prize now or receive the payments over the next 20 years. CALCULATE BOTH SITUATIONS AND SHOW ENDING AMOUNTS ONLY.