Professor:
Assignment #1
- Explain the Time Value of Money.
- Assume simple interest for the following:
A – $2000 deposited in an account paying 7.5% annual interest rate for 5 years.
Find the Future value of the funds.
B – $10,000 deposited in an account paying 8% annual interest rate for 3 years and 10% annual interest rate for an additional 3 years. What is the value of the funds at the end of the investment.
D – $2,500 earning 5% annually has grown to $3,500. Find how long did the funds take to grow (find t).
- Assume compounding interest for the following and use excel TVM functions.
A – $10,000 deposited in an account earning 5% interest for a period of 4 years.
- Find the future value of the funds using Annual Compounding.
- Find the future value of the funds using Quarterly Compounding.
- Find the future value of the funds using Monthly Compounding.
- Find the future value of the funds using Daily Compounding.
B – $5,000 grows to $5,500 at the end of two years. Interest compounds annually.
Find the annual interest rate.
C – $7,000 earns 8% per year compounded annually and grows to $10,860 at the end of the investment period. Find time (NPER).
D – An investment has grown to $15,000 over 9 years. The annual interest rate earned was 8% compounded annually.
Find the PV (initial value invested).
**Round all answers to two decimals.
