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Case Study: Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process,
Case Study: Assume that you are nearing graduation 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 the time value of money and the discounted cash flow analysis. See how you would do by answering the following questions: 1. Define the Present Value of a single amount and illustrate it using a timeline. 2. Define the Future Value of an ordinary anmuity and illustrate it using a timeline. 3. What interest rate would cause $100 to grow to $125,97 in 3 years? 4. How many years will it take for 136000$ to grow to be 468000$ if it is invested in an account with an annual interest rate of 8% ? 5. Find the future value of the following cashflows at the end of the 4th year, if the interest rate is 12% 6. An investor wants to have 55000 s after 4 years from now, how much he should deposite today in a savings account that pays annual interest rate of 12% compounded quartarly? 7. Why does a more frequent compouding process lead to a higher future value ? Can you illustrate this with an appropriate example? 8. If you want an investment to triple in 5 years, what interest rate must it earn? 9. You have 42180,53$ in a brokerage account and you expect to earn 12% annually. How many years will it take until your account totals 250000$ ? 10. You deposit at the end of each year for 4 years a capital of 2000 into an ordinary annuity that pays 7% annual rate at the beginning of each year. Using both the step-by-step method (in a table) and the unique formula method, determine the future value of your periodic deposits at the time of the last deposit? What is the future value one year after the last deposit
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