Worksheet #$3$ Part $1$: Compute the requested value$($s$)$ for each scenario in a table like the one shown below. Show all component numbers that factor into determination of the final answer$($s$)$ in separate cells.

Table $5$ Time Value of Money Solutions

Scenario

N

m

I

PV

PMT

FV

College

$?$

$?$

$?$

$?$

$?$

$?$

You have determined that $$150,000$ will be required $18$ years from now to help pay for your daughter$$s higher education. If your bank is paying $5\mathrm{.}75\%$ annual rate of return on its $$College Opportunity$$ account, how much must you deposit each month to reach your goal? $(2$ points$)$

Your brother in$-$law is offering to pay you $$50,000$ seven years from now in exchange for a $$20,000$ investment today. If you accept his offer, what annual rate of interest would you earn on your investment? $(2$ points$)$

You plan to retire in $12$ years and move to Cabo San Lucas where you have your eye on a sunny beach house. The current market value of the house is $$92,000$ and the annual appreciation rate is $6\mathrm{.}00\%.$ If you can earn an $8\mathrm{.}50\%$ annual rate of return on your Z$-$Trade investment account, how much must you invest at the end of each quarter for the next $12$ years to be able to buy your dream home upon retirement? $(2$ points$)$

Starting eleven years from now you would like to withdraw $$36,000$ a year for a period of $5$ years $($years $11$ through $15)$ plus the additional amount of $$24,000$ in year $15.$ Assuming an interest rate of $7\mathrm{.}50\%,$ how much must you deposit today to make these future withdrawals a reality? $(4$ points$)$

On January $1,1963,$ a kid from Sioux Falls purchased a limited$-$edition Superman comic at the original market price of $12$ cents. On January $1,2000(37$ years later$),$ the comic was sold at auction for $$8,700.$ What annual rate of return did this kid earn on the comic? $(2$ points$)$

Worksheet #$3$ Part $2$: The net cash flows associated with three investments are provided below. Assume that all blank cells represent zero net cash flows. Create the table below and show the maximum amount you are willing to pay for each investment. Assume a $12\mathrm{.}50\%$ discount rate. $(6$ points$)$

Table $6$ Maximum Willingness to Pay

End of Year

Z

Y

X

$1$

$ $40,000$

$ $40,000$

$2$

$40,000$

$3$

$40,000$

$4$

$40,000$

$5$

$40,000$

$ $40,000$

$200,000$

$6$

$40,000$

$7$

$40,000$

$8$

$40,000$

$9$

$40,000$

$10$

$40,000$

$40,000$