Assume that you are nearing graduation of your MBA program and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions.

A customer of the bank, Raj Kami, wants to deposit $100,000 in a savings account that pays a nominal rate of 8%.

1. If the bank compounds interest annually, how much will the customer have in his account 3 years from now?
2. What would the balance be in 3 years from now if the bank used quarterly compounding rather than annual compounding?
3. If Raj Kami deposited the $100,000 in 4 equal payments of $25,000 each at the end of years 1, 2, 3, and 4. How much would he have in the savings account at the end of year 4, based on 8% annual compounding?
4. Raj Kami wants to know how long it will take his sum of money to double if the growth rate per year is 8%
5. Wilson Wonderss bonds have 10 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $900. What is their yield to maturity?
6. What is the present value of a perpetuity that pays $1,000 per year if the appropriate interest rate is 5%?