Comprehensive in class Time Value of Money problems 100520

1. You are a retailer planning a sale on a security system that requires no payments for two years. At the end of two years, buyers must pay the full amount. The system;s suggested retail price is $4,100, but you are willing to sell it today for $3,000 cash. What is your sale price if payment will not occur for two years and the market interest rate is 10%?

2. Assume that you win at $150,000 cash sweepstake today. You decide to deposit this cash in an account earning 8% annual interest, and you plan to quit your job when the account equals $555,000. How many years will it be before you can quit working?

3. A company invests $45,000 per year for five years at 12% annual interest. Compute the value of this ordinary annuity investment at the end of five years.