Time Value of Money Review with Practice Questions 1. Future Value: How will $100 in deposit grow at 10% over 3 years? 2. Present Value: How much money we need to deposit to have $100 after 3 years at 10% interest rate? 3. Future Value of Annuity: You want to start a business in 3 years. If you save $1000 at the end of each year, how much will you have after 3years? (Assume 4. Present Value of Annuity: What is the market value for an account that has $1,000 deposit per year for 3 years? (Assume the deposit is at the end of each year and i=10% ) 5. Perpetuities: What is the Present Value of $1,000 forever? (Interest rate =10% ) 6. You are looking at an investment that will pay $1200 in 5 years if you invest $1000 today. What is the implied rate of interest? 7. Benjamin Franklin died on April 17, 1790. In his will, he gave 1,000 pounds sterling to Massachusetts and the city of Boston. He gave a like amount to Pennsylvania and the city of Philadelphia. Franklin originally specified that the money should be paid out 100 years after his death and used to train young people. Later, it was agreed that the money would be paid out 200 years after Franklin's death in 1990 . By that time, the Pennsylvania bequest had grown to about $2 million; the Massachusetts bequest had grown to $4.5 million. Assuming that 1,000 pounds sterling was equivalent to 1,000 dollars, what rate did the two states earn? (Note: the dollar didn't become the official U.S. currency until 1792.)