9,13,14,26

You will receive S6,800 three years from now. The discount rate is 10 perce What is the value of your investment two years from now? Multiply $6,800 X (1/1.10) or divide by 1.10 (one year's discount rate at 10 perce). What is the value of your investment one year from now? Multiply you What is the value of your investment today? Multiply your answer to pa Part The Cathedging Process 4. answer to part a by(1/1.10). by (1/1.10). value 2) b. c. money is alue lue he d. Use the formula PV - FV * toto find the present value of $6,600 received three years from now at 10 percent interest. 5. If you invest $9,000 today, how much will you have In 2 years at 9 percent? In 7 years at 12 percent? In 25 years at 14 percent? d. In 25 years at 14 percent (compounded semiannually)? 6. Your aunt offers you a choice of $20,100 in 20 years or $870 today. If discounted at 17 percent, which should you choose? 7. Your uncle offers you a choice of $105,000 in 10 years or $47,000 today. If money is discounted at 9 percent, which should you choose? 8. Your father offers you a choice of $105,000 in 12 years or $47,000 today. a. If money is discounted at 8 percent, which should you choose? b. If money is still discounted at 8 percent, but your choice is between $105,000 in 9 years or $47,000 today, which should you choose? 9. You are going to receive $205,000 in 18 years. What is the difference in presen value between using a discount rate of 12 percent versus 9 percent? 10. How much would you have to invest today to receive a. $15,000 in 8 years at 10 percent? b. $20,000 in 12 years at 13 percent? c. $6,000 each year for 10 years at 9 percent? d. $50,000 each year for 50 years at 7 percent? 11. If you invest $8,500 per period for the following number of periods, how much would you have? a. 12 years at 10 percent. b. 50 years at 9 percent. 12. You invest a single amount of $10,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years? 13. Mrs. Crawford will receive $7,600 a year for the next 19 years from her trust. If a 14 percent interest rate is applied, what is the current value of the future payments? 14. Phil Goode will receive $175,000 in 50 years. His friends are very jealous of him. If the funds are discounted back at a rate of 14 percent, what is the present value of his future "pot of gold"? 15. Sherwin Williams will receive $18,500 a year for the next 25 years as a result of a picture he has painted. If a discount rate of 12 percent is applied, should he be willing to sell out his future rights now for $165,000? ban 16. Carrie Tune will receive $19,500 for the next 20 years as a payment for a new song she has written. If a 10 percent rate is applied, should she be willing to sell out her future rights now for $160,000? 17. The Clearinghouse Sweepstakes has just informed you that you have won $1 million. The amount is to be paid out at the rate of $20.000 a year for the next 30 years. With a discount rate of 10 percent, what is the present value of & Rita Gonzales won the $41 million lottery. She is to receive $1.5 million a year 19 years. The discount rate is 14 percent. What is the current value of her winning? for the next 19 years plus an additional lump sum payment of $125 million after 19. Al Rosen invests $25.000 in a mint condition 1952 Mickey Mantle Topps baseball card. He expects the card to increase in value 12 percent per year for the next 10 years. How much will his card be worth after 10 years? 2 Christy Reed made a $2.000 deposit in her savings account on her 21st birthday. and she has made another $2.000 deposit on every birthday since then. Her account earns 7 percent compounded annually. How much will she have in the account after she makes the deposit on her 32nd birthday? 21. At a growth interest rate of 10 percent annually, how long will it take for a sum to double? to triple? Select the year that is closest to the correct answer creditor accept in payment immediately if she could earn 13 percent on her money? Chapter The Time Value of Money your (LOG Prese (LOG (LO (LC Fu (L P 1 ! Intermediate Problems 23. Jack Hammer invests in a stock that will pay dividends of $2.00 at the end of the first year, $2.20 at the end of the second year, and $2.40 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $33. What is the present value of all future benefits if a discount rate of 11 percent is applied? (Round all values to two places to the right of the decimal point.) 24. Les Moore retired as president of Goodman Snack Foods Company but is currently on a consulting contract for $35,000 per year for the next 10 years. a. If Mr. Moore's opportunity cost (potential return) is 10 percent, what is the present value of his consulting contract? b. Assuming Mr. Moore will not retire for two more years and will not start to receive his 10 payments until the end of the third year, what would be the value of his deferred annuity? 25. Juan Garza invested $20,000 10 years ago at 12 percent, compounded quarterly. How much has he accumulated? 26. Determine the amount of money in a savings account at the end of 10 years, given an initial deposit of $5,500 and a 12 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly. 27. As stated in the chapter, annuity payments are assumed to come at the end of each payment period (termed an ordinary annuity). However, an excep- tion occurs when the annuity payments come at the beginning of each period (termed an annuity due). To find the present value of an annuity due, the annuity formula must be adjusted as to the following: 1 (1 + i) - +1 PVAD = AX