Compute the value for each of the following independent situations. Note: Use Excel or a financial calculator. Round your answers to 2 decimal places. 1. To save for their new child's college education, a couple places $25,000 in an account. What amount will accumulate in the account at the end of 18 years, assuming an interest rate of 7.25% compounded annually? 2. An individual has just inherited a piece of land. The individual plans to hold the land for three years and then expects the land to sell for $200,000. What is the value today of inheriting the land, assuming an interest rate of 8.5% compounded annually? 3. To save money for the down payment on a house, an individual places $5,000 in an account at the end of each quarter. What amount will accumulate in the account at the end of four years, assuming an interest rate of 9.75% compounded quarterly? 4. To purchase a car, an individual agrees to pay $800 at the end of each month for the next six years. What is the cost of the car today, assuming an interest rate of 6.5%. 5. To help repay debt that will come due in 12 years, a company places $20,000 in an account at the beginning of each six-month period. What amount will accumulate in the account at the end of 12 years, assuming an interest rate of 4.5% compounded semiannually? 6. To rent office space, a company signs a lease agreeing to pay $2,500 at the beginning of each month for the next three years. What is the cost today of the lease, assuming an interest rate of 5% compounded monthly? 1. Future Value 2. Present Value 3. Future Value 4. Present Value 5. Future Value 6. Present Value
Compute the value for each of the following independent situations. Note: Use Excel or a financial calculator. Round your answers to 2 decimal places. 1. To save for their new child's college education, a couple places $25,000 in an account. What amount will accumulate in the account at the end of 18 years, assuming an interest rate of 7.25% compounded annually? 2. An individual has just inherited a piece of land. The individual plans to hold the land for three years and then expects the land to sell for $200,000. What is the value today of inheriting the land, assuming an interest rate of 8.5% compounded annually? 3. To save money for the down payment on a house, an individual places $5,000 in an account at the end of each quarter. What amount will accumulate in the account at the end of four years, assuming an interest rate of 9.75% compounded quarterly? 4. To purchase a car, an individual agrees to pay $800 at the end of each month for the next six years. What is the cost of the car today, assuming an interest rate of 6.5%. 5. To help repay debt that will come due in 12 years, a company places $20,000 in an account at the beginning of each six-month period. What amount will accumulate in the account at the end of 12 years, assuming an interest rate of 4.5% compounded semiannually? 6. To rent office space, a company signs a lease agreeing to pay $2,500 at the beginning of each month for the next three years. What is the cost today of the lease, assuming an interest rate of 5% compounded monthly? 1. Future Value 2. Present Value 3. Future Value 4. Present Value 5. Future Value 6. Present Value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Compute the value for each of the following independent situations.
Note: Use Excel or a financial calculator. Round your answers to 2 decimal places.
1. To save for their new child's college education, a couple places $25,000 in an account. What
amount will accumulate in the account at the end of 18 years, assuming an interest rate of
7.25% compounded annually?
2. An individual has just inherited a piece of land. The individual plans to hold the land for three
years and then expects the land to sell for $200,000. What is the value today of inheriting the
land, assuming an interest rate of 8.5% compounded annually?
3. To save money for the down payment on a house, an individual places $5,000 in an account
at the end of each quarter. What amount will accumulate in the account at the end of four
years, assuming an interest rate of 9.75% compounded quarterly?
4. To purchase a car, an individual agrees to pay $800 at the end of each month for the next six
years. What is the cost of the car today, assuming an interest rate of 6.5%.
5. To help repay debt that will come due in 12 years, a company places $20,000 in an account at
the beginning of each six-month period. What amount will accumulate in the account at the
end of 12 years, assuming an interest rate of 4.5% compounded semiannually?
6. To rent office space, a company signs a lease agreeing to pay $2,500 at the beginning of
each month for the next three years. What is the cost today of the lease, assuming an interest
rate of 5% compounded monthly?
1. Future Value
2. Present Value
3. Future Value
4. Present Value
5. Future Value
6. Present Value
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