$|$Unit$-3$ Assignment

Chapter $5($Introduction to Valuation: The TVM$)$

Answer all questions:

$1.$ Suppose you deposit $\backslash (\backslash$$ $1,000\backslash )$ today $\backslash (($t$=0)\backslash )$ in a bank account that pays an interest rate of $\backslash (7\backslash \%\backslash )$ per year. If you keep the account for $5$ years before you withdraw all the money, how much will you be able to withdraw after $5$ years?

$2.$ Find the present value of a security that will pay $\backslash (\backslash$$ $2,500\backslash )$ in $4$ years. The opportunity cost $($interest rate that you could earn from alternative investments$)$ is $\backslash (5\backslash \%\backslash )$ per year.

$3.$ Solve for the unknown in each of the following:

$4.$ Assume that the total cost of a college education will be $\backslash (\backslash$$ $400,000\backslash )$ when your child enters college in $22$ years. You presently have $\backslash (\backslash$$ $75,000\backslash )$ to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?

$5.$ You are trying to buy a new car which is selling for $\backslash (\backslash$$ $68,000\backslash ).$ You have $\backslash (\backslash$$ $7,000\backslash )$ today that can be invested at your bank. The bank pays $\backslash (6\backslash \%\backslash )$ annual interest on its account. How long will it $($approximately$)$ be before you have enough to buy the car?

$6.$ You expect to receive $\backslash (\backslash$$ $10,000\backslash )$ at graduation in two years. If you invest the amount at $\backslash (11\mathrm{.}3264\backslash \%\backslash )$ until you have $\backslash (\backslash$$ $50,000\backslash ),$ how long will you wait from now?

$7.$ In $1985,$ the first U$.$S$.$ Open Golf Championship was held. The winner's prize money was $\backslash (\backslash$$ $300\backslash ).$ In $2020,$ the winner's check was $\backslash (\backslash$$ $2\backslash )$ million. What was the percentage increase per year in the winner's check over this period? If the rate stays the same, what will be the check amount in $2040?$