Finance Homework

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• Chapter9:P6,P9,P10,P11,P12,P13,P15 MUST SHOW YOUR WORK

P6. Determine the present values (PVs) if $5,000 is received in the future (i.e., at the end of each indicated time period) in each of the following situations:

a) 5 percent for 10years

b) 7 percent for 7 years

c) 9 percent for 4 years

P9. Assume you are planning to invest $5,000 each year for 6 years and will earn 10% per year. Determine the future value (FV) of this annuity if your first $5,000 is invested at the end of the first year.

P10. Determine Present value (PV) now of an investment of $3,000 made one year from now and an additional $3,000 made 2 years from now if the annual discount is 4%.

P11. What is the present value of a loan that calls for the payment of $500 per year for 6 years if the discount rate is 10% and the first payment will be made 1 year from now? how would your answer change if the $500 per year occurred for 10 years?

P12. Determine the annual payment on a $500,000, 12% business loan from a commercial bank that is to be amortized over a 5 year period.

P13. Determine the annual payment on a $15,000 loan that is to be amortized over a 4 year period and carries a 10% interest rate. Prepare a loan amortization schedule for this loan.

P15. Assume a bank loan requirees an interest payment of $85 per year and a principal payment of $1,000 at the end of the loans 8 year life.

a) at what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5% interest rate? that is, what would be the present value of this loan?

b) Now, if the interest rates on other similar quality loans are 10%, what would be the PV of this loan?

c) what would be the PV of the loan if the interest rate is 8% on similar quality loans?