Question
.Solve for the future value of a lump sum with the following situation: Investor deposits $1,000 today in an interest bearing account. Account pays 6%
.Solve for the future value of a lump sum with the following situation: Investor deposits $1,000 today in an interest bearing account.
Account pays 6% interest compounded annually.
Investor expects to withdraw the original principal + interest at the end of five years.
2.Solve for the future value of an annuity with the following situation: Investor deposits $1,200 at the end of each year in an interest bearing account.
Account pays 5% interest compounded annually.
Investor expects to withdraw the principal + interest at the end of five years.
3.Solve for the Present Value of a Lump Sum with the Following Situation: Investor has been offered an investment opportunity that is expected to provide $1,300 cash inflow at the end of five years.
Investor is able to make 5% compounded annually on other investments. (This 5% discount rate can be thought of as an opportunity cost of capitalthe return the investor is forgoing on an alternative investment of equal risk).
How much can the investor pay today for this future lump sum receipt and earn a 5% return?
4.Solve for the Present Value of an Annuity with the following situation: Investor has been offered an investment opportunity that is expected to provide $1,276.28 cash inflow every year for 10 years.
Investors requiring a 5% return want to know the maximum they could pay for this annuity and still earn 5%.
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