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Question 1: Time Value of Money 1) Find the value, in 10 years time, of 1100 invested at 7% interest compounded annually. (2 marks) 2)
Question 1: Time Value of Money 1) Find the value, in 10 years time, of 1100 invested at 7% interest compounded annually. (2 marks) 2) A bank offers a return of 5% interest compounded annually. Find the future value of a principal of 5500 after 8 years. What is the overall percentage rise over this period? (2 marks) 3) A department store has its own credit card facilities, for which it charges interest at a rate of 2% each month. Explain briefly why this is not the same as an annual rate of 24%. What is the annual percentage rate? (2 marks) 4) Find the present value of 360 000 which is due in ten years if the interest rate is 7% per year compounded annually. (2 marks) 5) If $1,500 is borrowed for half a year at a simple interest rate of 8% per year, what amount must be repaid at the end of the half-year? (2 marks) 6) Suppose that you will receive annual payments of $10,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments? (10 marks)
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