Chapter 5 accounting homework The Time Value of money. The Fundamentals of corporate finance.

ACCT2060 Chapter 5 Homework Spring 2016 1. If you deposit $1,000 today in a bank account paying 10%, how much will you have in one year? If you need $2,000 in one year, how much do you have to deposit today (assume 10% return)? 2. An art collector has the opportunity to invest in bank certificates of deposit which pay 8% per year. What is the future value of $150,000 if the collector elects to purchase a bank certificate of deposit for 10 years? 3. What is the present value of the sale if an art collector would receive $3.25 million when he sold a painting in 5 years? Assume 6% return on investments. 4. An individual has the opportunity to invest $10,000 today to acquire an asset which can be sold for $18,000 in 3 years. What interest rate will be earned? 5. The cash flows from an investment will be $200 one year from today (year 1) and $250 two years from today (year 2). The market rate of interest is 10%. Find the present value for this investment. Hint - find the present value of each separately, then add them together. 6. The future value of an investment will be $14,500 in 5 years. It is currently worth $11,000. What is the interest rate that will be earned? 7. How many years will it take for $400 to grow to $912 at 6%