How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how much would you have to deposit today to have $15,000 when you graduate? Would you rather have $463 now or $1,000 ten years from now? Assume that you can earn 9% on your investments.
How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how much would you have to deposit today to have $15,000 when you graduate? Would you rather have $463 now or $1,000 ten years from now? Assume that you can earn 9% on your investments.
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
Related questions
Question
Transcribed Image Text:Exercise B-18 Practical applications of the time value of money P1 P2 P3 P4
a. How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%.
b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments,
how much would you have to deposit today to have $15,000 when you graduate?
c. Would you rather have $463 now or $1,000 ten years from now? Assume that you can earn 9% on your investments.
d. Assume that a college parking sticker today costs $90. If the cost of parking is increasing at the rate of 5% per year, how much will the
college parking sticker cost in eight years?
e. Assume that the average price of a new home is $158,500. If the cost of a new home is increasing at a rate of 10% per year, how much
will a new home cost in eight years?
f. An investment will pay you $10,000 in 10 years and it also will pay you $400 at the end of each of the next 10 years (Years 1 through
10). If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment?
g. A college student is reported in the newspaper as having won $10,000,000 in the Kansas State Lottery. However, as is often the custom
with lotteries, she does not actually receive the entire $10 million now. Instead she will receive $500,000 at the end of the year for each
of the next 20 years. If the annual interest rate is 6%, what is the present value (today's amount) that she won? (Ignore taxes.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education