Time Value of Money Functions

SOLVE THESE PROBLEMS

7. You can invest $100 at the end of 1 year into an investment earning 6%. At the end of year 2, you will add $1,000 to this investment; at the end of year 3, you will add another $1,000. What will the investment be worth at the end of year 3?

7. You found an investment with the following cash flows:

End of year Cash Received

$500

$550

$600

What are the most you are willing to pay if you believe investments of this risk warrant a 7% return?

8. You plan to invest $1,000 at the end of EVERY year for the next 25 years. You believe you can earn 7% annual compounding interest. How much will your investment be worth in 25 years?

9. How much would you have to deposit today to be able to withdraw $1,000 EACH year forever? You believe you can earn 4% annual compounding interest.

10. How much money would you have to deposit EVERY year for ten years into an investment earning 5% annual compounding interest to have $50,000 at the end of year 10?