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Mr Ahmed has a famous mobile repairing center in Gujrat. He is confused about the time valuation of money regarding his payment. Apply your knowledge
Mr Ahmed has a famous mobile repairing center in Gujrat. He is confused about the time valuation of money regarding his payment. Apply your knowledge of time value of money and help him to determine the valuation for the given time periods.
- 100 at the end of three years is worth how much today, assuming a discount rate of (i) 100 percent? (ii) 10 percent?
- What is the aggregate present value of $500 received at the end of each of the next three years, assuming a discount rate of (i) 4 percent? (ii) 25 percent?
- Suppose you were to receive $1,000 at the end of 10 years. If your opportunity rate is 10 percent, what is the present value of this amount if interest is compounded (a) annually? (b) quarterly?
- At the end of 10 years, how much is a $100 initial deposit worth, assuming an annual interest rate of 10 percent compounded (i) semiannually? (ii) quarterly?
- Mr Ahmed has inherited $25,000 and wishes to purchase an annuity that will provide him with a steady income over the next 12 years. He has heard that the local savings and loan association is currently paying 6 percent compound interest on an annual basis. If he were to deposit his funds, what year-end equal-dollar amount (to the nearest dollar) would he be able to withdraw annually such that he would have a zero balance after his last withdrawal 12 years from now?
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