3. Future and Present Value Calculations

A. Mark J. is due to receive a cash stipend of $80,000 from a family trust at the end of five years. A relative has offered to purchase Marks interest in the trust fund. If Marks investment rate is 10%, what is the minimum amount that he should accept today for the $80,000 interest?

B. Maria H. has decided to deposit $3,000 per year in a savings certificate account for the next 20 years. If the account is able to earn 6% per year during that time, how much will accumulate in the account at the end of the 20 years?

C. Lucy G. has the opportunity to buy a property from which she can earn $15,000 per year in rental income for a period of 10 years. If Lucys investment rate is 12% per year, what is the maximum amount that she would be willing to pay today and still meet her investment criterion?

D. Andrew M. has $20,000 to invest. How much money will Andrew have at the end of 30 years if the $20,000 lump sum is put into a retirement account and allowed to earn 8% per year for a period of 30 years?