1. Find the present value of a $20,000 lump sum to be received 5 years from now if the opportunity cost applied is 6% compounded annually.
2. You want to be a millionaire by the time you are 55, which is 30 years from now. What is the present value of $1,000,000 discounted back 30 years at an interest rate of 9.0% compounded annually?
3. Which would you rather have: a guaranteed $1,000,000 in 30 years or $300,000 in 15 years if your opportunity cost is 6.0% compounded annually?
4. Over the past 50 years the average annual rate of return on investments in the stock market has been 9%. If Janae wants to accumulate $1,500,000 by the time she is 65 years old and she is now 35 (30 years from now), what lump sum amount of money should she invest in the stock market if future returns will average the same 9% compounded annually?
5. Jorge has promised his niece that he will give her $40,000 in 6 years when she has her 18th birthday. What amount would is niece accept today instead of waiting 6 years to receive the $40,000 if her opportunity cost is 10% compounded annually?
6. Britanee believes that inflation will average 6% over the next 8 years and she will receive $32,000 as an inheritance 4 years from now. She would like to have an idea of the type of car she can purchase when she gets the money. Using only the inflation rate, a car that will cost $32,000 in 8 years should sell for what price today?
7. Harriett's opportunity cost is 12% compounded monthly. What would she be willing to pay, today, for the right to receive $6,000 ten years from now?7.
8. To the nearest dollar, what is the present value of $80,000 to be received 8 years from now if the discount rate is 8% compounded quarterly?
9. Find the present value of a $20,000 lump sum to be received 5 years from now if the opportunity cost applied is 6% compounded monthly.