Time Value of Money Essay

1- She takes the cash bonus and decide to invest it in a 5-year bond which rate is 6,02%.

How much would you pay for a security that pays you $500 every 4 months for the next 10 years if you require a return of 8% per year compounded monthly?

1. A condo in Orange Beach, Alabama, listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?

Claire is applying for a loan to purchase a pre‐owned car. She is told that the monthly payment for the loan

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

1) Establish the principal and interest amount of the monthly payment. Using the 30 year loan principal and interest amount of the payment is $1,150.92

10. You have $2,000 today and want to quadruple your money in 10 years. What interest rate must you earn?

$25,000 if invested for 18 years at a 1.72% interest rate. The stated rate of

For $1,000 financed at 5%, the factor to calculate your monthly payment is .659955739. Therefore, for $80,000 your payment is $528 per month or $6,336 per year. (Rounded)

Debbie wants to have $38,855 in her bank account 5 years from now. The account will pay 0.7% interest per month. How much money does she need to put in her bank account at the end of each month to achieve this goal?

14. Your parents spent $6,200 to buy 500 shares of stock in a new company 13 years ago. The stock has appreciated 9 percent per year on average. What is the current value of those 500 shares?

Purchasing a car is never an easy decisions but many times a car is a necessity. The scenario presented will be the following. The price of the used car is $20,000. Sales tax on this car is 8.4% of the price of the vehicle. You intend to finance the entire cost of the car and sales tax, less a down payment of $1,500. You intend to finance the car for 48 months and your car payment will be $455.12 per month. The amount financed will be the cash price subtracting the down payment. In this case, the cash price will be $20,000 and the down payment is $1,500. After subtracting these two amounts, I obtained that the amount financed will be $18,500. The installment price of the car will be $23,345.76. This amount is obtained by multiplying the amounts of financing by the monthly rate (48 x $455.12) which will equal $21,845.76 in addition you must add the down payment of $1,500 to get the total value of the car. Finance charges will be the total amount of $23,345.76 minus the cash price of $20,000.00. This will leave a finance charges to equal $3,345.76.

You want to buy a condo 5 years from now, and you can save $3,000 per year, beginning immediately. You will make 5 deposits in an account that pays 6% interest. Under these assumptions, how much will you have 5 years from today? $17,925.9

2. Interest expense of $21,716 for the first year at 5% interest implies an average one

Assume that the annual payments in the sixth year is equal to the rental payment in the fifth year ( 112.9 and 86.0) and the remainder of the lump sum values (54.6 and 17.8) is due in the seventh year. With a discount rate of 5.4%, the present values of the rental payments for the years 2006 and 2007 are as follows: