a. How much would you have to deposit today if you wanted to have $46,000 in three years? Annual interest rate is 10%. b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 6% on your investments, how much would you have to deposit today to have $12,000 when you graduate? Note: Round your answer to 2 decimal places. c-1. Calculate the future value of an investment of $558 for ten years earning an interest of 9%. Note: Round your answer to 2 decimal places. c-2. Would you rather have $558 now or $1,000 ten years from now? d. Assume that a college parking sticker today costs $68. If the cost of parking is increasing at the rate of 6% per year, how much will the college parking sticker cost in seven years? Note: Round your answer to 2 decimal places. e. Assume that the average price of a new home is $114,500. If the cost of a new home is increasing at a rate of 7% per year, how much will a new home cost in eight years? Note: Round your answer to 2 decimal places. f. An investment will pay you $7,000 in 9 years, and it also will pay you $240 at the end of each of the next 9 years (years 1 through 9). If the annual interest rate is 5%, how much would you be willing to pay today for this type of investment? Note: Round your intermediate calculations and final answer to the nearest whole dollar. g. A college student is reported in the newspaper as having won $7,500,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $7.5 million now. Instead she will receive $375,000 at the end of the year for each of the next 20 years. If the annual interest rate is 7%, what is the present value (today's amount) that she won? (ignore taxes). Note: Round your answer to nearest whole dollar. a. Present value b. Present value c-1. Future value c-2. Would you rather have $558 now or $1,000 ten years from now? d. Future value e. Future value f. Present value g. Present value
a. How much would you have to deposit today if you wanted to have $46,000 in three years? Annual interest rate is 10%. b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 6% on your investments, how much would you have to deposit today to have $12,000 when you graduate? Note: Round your answer to 2 decimal places. c-1. Calculate the future value of an investment of $558 for ten years earning an interest of 9%. Note: Round your answer to 2 decimal places. c-2. Would you rather have $558 now or $1,000 ten years from now? d. Assume that a college parking sticker today costs $68. If the cost of parking is increasing at the rate of 6% per year, how much will the college parking sticker cost in seven years? Note: Round your answer to 2 decimal places. e. Assume that the average price of a new home is $114,500. If the cost of a new home is increasing at a rate of 7% per year, how much will a new home cost in eight years? Note: Round your answer to 2 decimal places. f. An investment will pay you $7,000 in 9 years, and it also will pay you $240 at the end of each of the next 9 years (years 1 through 9). If the annual interest rate is 5%, how much would you be willing to pay today for this type of investment? Note: Round your intermediate calculations and final answer to the nearest whole dollar. g. A college student is reported in the newspaper as having won $7,500,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $7.5 million now. Instead she will receive $375,000 at the end of the year for each of the next 20 years. If the annual interest rate is 7%, what is the present value (today's amount) that she won? (ignore taxes). Note: Round your answer to nearest whole dollar. a. Present value b. Present value c-1. Future value c-2. Would you rather have $558 now or $1,000 ten years from now? d. Future value e. Future value f. Present value g. Present value
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A3
Transcribed Image Text:Exercise B-18 (Algo) Practical applications of the time value of money LO P1, P2, P3, P4
Provided are links to the present and future value tables: (PV of $1, FV of $1, PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.
a. How much would you have to deposit today if you wanted to have $46,000 in three years? Annual interest rate is
10%.
b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 6% on
your investments, how much would you have to deposit today to have $12,000 when you graduate?
Note: Round your answer to 2 decimal places.
c-1. Calculate the future value of an investment of $558 for ten years earning an interest of 9%.
Note: Round your answer to 2 decimal places.
c-2. Would you rather have $558 now or $1,000 ten years from now?
d. Assume that a college parking sticker today costs $68. If the cost of parking is increasing at the rate of 6% per year,
how much will the college parking sticker cost in seven years?
Note: Round your answer to 2 decimal places.
e. Assume that the average price of a new home is $114,500. If the cost of a new home is increasing at a rate of 7% per
year, how much will a new home cost in eight years?
Note: Round your answer to 2 decimal places.
f. An investment will pay you $7,000 in 9 years, and it also will pay you $240 at the end of each of the next 9 years
(years 1 through 9). If the annual interest rate is 5%, how much would you be willing to pay today for this type of
investment?
Note: Round your intermediate calculations and final answer to the nearest whole dollar.
g. A college student is reported in the newspaper as having won $7,500,000 in the Kansas State Lottery. However, as is
often the custom with lotteries, she does not actually receive the entire $7.5 million now. Instead she will receive
$375,000 at the end of the year for each of the next 20 years. If the annual interest rate is 7%, what is the present value
(today's amount) that she won? (ignore taxes).
Note: Round your answer to nearest whole dollar.
a. Present value
b. Present value
c-1. Future value
c-2. Would you rather have $558 now or $1,000 ten
years from now?
d. Future value
e. Future value
f. Present value
g. Present value
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