Question1:

The Formula answer for the Intermediate Time Value of Money for 1a, 1b, 2a, 2b

D G H M N o P Q R S T U v w X Y Z AA AB AC AD AE AF AG AH Al AK AL AM NPY AN 2a. What's the present value of a 5-year ordinary annuity of $350 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? Interest rate 6% Year 0 1 2 4 5 Ann Pmt $0 $350 $350 $350 Lump Sum $350 $350 $1,000 Total CFs $0 $350 $350 $350 $350 $1,350 NPV 2b. What is the PV if the $350 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? Interest rate 6% Year 0 5 6 Ann Pmt $0 $350 $350 $350 9 10 Lump Sum $350 $350 $350 $350 $350 $35L $350 Total CFs $1.00 $0 $350 $350 $350 $350 $350 $350 $350 $ $350 $350 $1,350 48 NPY 3. What's the present value of the following uneven cash flow stream: $0 at Time 0, $150 in Year 1 (or at Time 1), $200 in Year 2, $0 in Year 3, and $500 in Year 4 if the interest rate is 8%? Interest rate 8% Year CFs $150 $200 $500 NPV 4. An investment costs $350 and is expected to produce cash flows of $100 at the end of each of the next 4 years, then an extra lump sum payment of $300 at the end of the 4th year. What is the expected rate of return on this investment (Internal Rate of Return)? Year 0 1 2 Ann Pmt -$350 $100 $100 $100 Lump Sum $100 $300 Total CFs -$350 $100 $100 $100 $400 67 IBR 68 69 70 5. An investment costs $500 and is expected to produce cash flows of $100 at the end Year 1, $200 at the end or Year 2, and $400 at the end of Year 3. What is the expected rate of return on this investment? 71 72 Year CFs -$500 $200 $400 fx 350 TVM Basics Intermediate TVM +C D M o P Q R S T U v w x 2 AA AB AC AD AE AF Intermediate Time-Value of Money Problems AG AH Al AK AL AM AN Total Number of Questions: 12 1a. What's the present value of a 5-year ordinary annuity of $200 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? Interest rate 6% Year 10 Ann Pmt SO $200 $200 Lump Sum $200 $200 $200 Total CFs $1,000 13 $200 $200 $200 $200 $1,200 14 15 16 17 1b. What is the PV if the $100 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? 18 Interest rate 6% 19 20 Year 21 1 3 4 Ann Pmt SO 5 6 7 $100 $100 8 $100 9 10 22 $100 $100 $100 $100 $100 $100 $100 23 Lump Sum Total CFs 24 $0 $100 $100 $100 $1,000 $100 $100 $100 $100 $100 $1,100 25 NPV 26 27 28 2a. What's the present value of a 5-year ordinary annuity of $350 plus an additional $1000 at the end of Year 5 if the interest rate is 6%? 29 Interest rate 30 6% 31 Year 32 0 1 2 3 33 Ann Pmt SO $350 $ $350 $350 34 Lump Sum $350 35 Total CFs $0 $350 $350 $1.000 $350 $350 $1,350 36 NPV 38 2b. What is the PV if the $350 payments occur in Years 1 through 10 and the $1000 comes at the end of Year 10? 40 Interest rate 6% Year Ann Pmt So Lump Sum $350 $350 $350 $350 $350 $350 $350 $350 $35L 10 $350 $1,00 fx 350 TVM Basics Intermediate TVM +