Managerial Finance $($MBA $5323)$

Homework #$6$: Time Value of Money

$1.$ calculating future values

Sum today $($PV$)$ interest rate $($I$/$Y$)$ length of time $($N$)$ compounding

$$25008\%$ per year $20$ years annual

$$25008\%$ per year $20$ years quarterly

$2.$ calculating present values

Future sum $($FV$)$ interest rate $($I$/$Y$)$ length of time $($N$)$ compounding

$$750010\%$ per year $5$ years annual

$$750010\%$ per year $5$ years semi$-$annual

$3.$ calculating interest rates $($rates of return$)$

Be sure to state your final answers as annual rates.

Sum today $($PV$)$ future sum $($FV$)$ length of time $($N$)$ compounding

$$700$ $$130018$ years annual

$$950$ $$18005$ years semi$-$annual

$4.$ calculating the number of periods

Be sure to state your final answers as years.

Sum today $($PV$)$ future sum $($FY$)$ interest rate $($I$/$Y$)$ compounding

$$4000$ $$750010\%$ per year annual

$$38,650$ $$213,38012\%$ per year monthly

$5.$ Consider the following five annuities:

Annual annual number of

$ amount rate years

$12,00073$

$55,0001215$

$700209$

$140,00057$

$22,500105$

For each of the annuities, calculate the present value TWICE $$ once assuming a regular $($deferred$)$ annuity and once assuming an annuity due.

$6.$ Based on your answers to #$5,$ all else being equal, which type of annuity $($regular or due$)$ would be preferable. Why?