Question - Time Value of Money
Scenario 1 - Jonas Smith wants to accumulate a sum of money to pay for his MACC program. Rather than investing a single amount today, he decides to invest $5,000 a year over the next three years in a savings account account paying 8% interest compounded semi-annually. He decides to make the first payment to the bank immediately. How much will Jonas have available in his account at the end of three years?
Scenario 2 - Assume that you borrow $1,000 from a friend and intend to repay the amount in five equal annual installments beginning one year from today. Your friend wishes to be reimbursed for the loan at 7% per year. What is the required annual payment that must be made to repay the loan in five years?
Scenario 3 - On June 30, 2010, Greyson Inc. issued $200 million of 10% bonds. The bonds pay interest semi-annually and mature on June 30, 2030. They were sold to yield 12% interest. What is the selling price of the bond?
Instructions: Using the tables at the back of Chapter 6, answer the questions above. You MUST show all work in order to receive credit for the problems.