Time Value of Money Problems 1. Zach received a signing bonus of $5000 that he would...
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Time Value of Money Problems 1. Zach received a signing bonus of $5000 that he would like to use in 7 years towards a down payment on a house. If he invests this money today and earns 6% interest, compounded semi-annually, how much will have accumulated towards his down payment when he is ready to use it? What are you solving for? Inputs: Pv Nper Rate Pmt FVOL $7,562.95 2. Anna received a small inheritance and has decide to use some of the proceeds to take her entire family on a trip to Hawaii at the end of next year (N=2). She estimates she will need $11,500 for this trip. If she can earn 4.5% annual interest, how much does she need to deposit today? What are you solving for? Inputs: PV() Nper Rate Pmt Fv $10,530.89 5. After 20 years, Joe decides to increase his monthly 401(k) contribution to $200/month, and he does this for the next 20 years. Based on his research, he believes he can consistently earn 8% interest. If he is correct, how much money will he have earned by the end of this 40 year period? HINT: Students, you will have a PV in this second calculation, in addition to the monthly payments. What are you solving for? Inputs: Pv Nper Rate Pit FV() $355,767.05 6. Suppose that Joe decided instead to stick with his $82 monthly investment for the full 40 years. He is still earning 8% interest. How much money will he have earned by the end of 40 years under this scenario? What are you solving for? Inputs: Pv Nper Rate Pmt FV() $286,262.64 Time Value of Money Problems 1. Zach received a signing bonus of $5000 that he would like to use in 7 years towards a down payment on a house. If he invests this money today and earns 6% interest, compounded semi-annually, how much will have accumulated towards his down payment when he is ready to use it? What are you solving for? Inputs: Pv Nper Rate Pmt FVOL $7,562.95 2. Anna received a small inheritance and has decide to use some of the proceeds to take her entire family on a trip to Hawaii at the end of next year (N=2). She estimates she will need $11,500 for this trip. If she can earn 4.5% annual interest, how much does she need to deposit today? What are you solving for? Inputs: PV() Nper Rate Pmt Fv $10,530.89 5. After 20 years, Joe decides to increase his monthly 401(k) contribution to $200/month, and he does this for the next 20 years. Based on his research, he believes he can consistently earn 8% interest. If he is correct, how much money will he have earned by the end of this 40 year period? HINT: Students, you will have a PV in this second calculation, in addition to the monthly payments. What are you solving for? Inputs: Pv Nper Rate Pit FV() $355,767.05 6. Suppose that Joe decided instead to stick with his $82 monthly investment for the full 40 years. He is still earning 8% interest. How much money will he have earned by the end of 40 years under this scenario? What are you solving for? Inputs: Pv Nper Rate Pmt FV() $286,262.64
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Lets solve each of these time value of money problems step by step 1 Zachs Investment Given PV Prese... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
Posted Date:
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