TIME VALUE OF MONEY Problem TV5-1 To enable you to complete your last year of Business School and then proceed to Law School, you will need S37,000 per year for each of the next four years, starting one year from aow. Your rich uncle, who offers to put you through school, deposits in an interest bearing account, earning 8% compounded annually, a sum of money today that is sufficient to cover all expenses. a. How much was the deposit? b. How much will be in the account immediately after you make the first withdrawal? c. How much will be in the account immediately after you make the last withdrawal? Problem TVS-2 You need toborrow $4,000 and you are considering the following two options: 1) Borrowing from We'll Stiff You Savings and Loan Assn. The loan would require payments of $378.24 per month for each of the next 12 months 2) Borrowing from Laid Back Mutual Savings Bank at an annual cost of 12 %. The loan would require 12 equal monthly payments commencing one month from now. Which of the two borrowing options is more fiscally prudent? Problem TV5-3 Little Joe is only one year old, but his uncle is already planning a college program for him at the uncle's Alma Mater, where Joe will, of course, attend. The annual tuition at Matchbook State is now $14,000, but is expected to increase at a compound rate of 6% per year for the next 25 years. If all goes according to schedule, Joe will enter college 17 years from today, so annual tuition payments will be starting on that date and continuing for each of the three years thereafter. Joe's uncle plans to begin a savings program by depositing an amount into a savings account today, which contribution will grow annually by 3%, and deposited annually at the end of each of the next 16 years (ending on the date Joe enters college). If the savings account earns interest at a compound annual rate of 8% , over the entire period, what amount must be deposited today, that will grow annually by 3 % for Joe's uncle to meet the expected tuition costs? ning t