please type or write formulas on page or in other column that used to solve the problems,

Week12 Time Value of Money Practice Test

Complete these questions in Microsoft Excel using formulas learned in class.

1. A companys 2005 sales were $10 million. If sales grow at 8% per year, how large will they be in 8 years?

2. Suppose a government bond will pay $1,000 three years from now. If the going interest rate on 3 year government bonds is 4%, how much is the bond worth today?

3. The bank offers to sell you a bond for $613.81. No payments will be made until the bond matures 10 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

4. Nike corporation earnings per share in 2005 were $4, and its growth rate during the prior 5 years was 9% per year. If that growth rate were maintained, how long would it take for Nikes earnings per share to double?

5. You have a chance to buy an annuity that pays $1,000 at the end of each year for 5 years. You could earn 6% on your money in other investments with equal risk. What is the most you should pay for the annuity?

6. Suppose you inherited $200,000 and invested it at 6% per year. How much could you withdraw at the end of each of the next 15 years?

7. You are buying your first house for $220,000, and are paying $30,000 as a down payment. You have arranged to finance the remaining $190,000 30year mortgage with a 7% nominal interest rate and monthly payments. What are the equal monthly payments you must make?

8. Suppose you have to invest $15,000 at an interest rate of 3.5% (compounded quarterly) for a period of 5 years. What will be the value of your investment at the end of 5 years?

9. You have $900 to invest today. In how many years will it double if you invest it at an interest rate of 11% compounded annually?

10. Suppose you want to buy a home after 3 years and you will need $15,000 for that. You open a savings account and deposit a lump sum amount of $2,000. You want to make a monthly payment at an interest rate of 4.5%. What should be the constant monthly payment you should make to reach the goal of $15,000 after 3 years?

11. You are planning for an early retirement, so you decide to invest $5,000 per year, starting at age 23. You plan to retire when you accumulate $1,000,000. If the average rate of return on your investments is 8%, which formula in B4 will allow you to determine how many years you must invest?