TIME VALUE OF MONEY 1. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you receive? a.$1,171 b$1,126 c.$1,082 d.$1,163 e. $1,008 2. A real estate investment has the following expected cash flows: YearCash Flows 1$10,000 225,000 350,000 435,000 The discount rate is 8 percent. What is the investment's present value? a.$103,799 b$ 96,110 c.$ 95,353 d$120,000 e.$ 77,592 3. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $4,000 in Year 9, with all cash flows to be received at the end of the year. If you require a 14 percent rate of return, what is the present value of these cash flows?
TIME VALUE OF MONEY 1. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college. Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account. How much money will you receive? a.$1,171 b$1,126 c.$1,082 d.$1,163 e. $1,008 2. A real estate investment has the following expected cash flows: YearCash Flows 1$10,000 225,000 350,000 435,000 The discount rate is 8 percent. What is the investment's present value? a.$103,799 b$ 96,110 c.$ 95,353 d$120,000 e.$ 77,592 3. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a year in Years 6 through 8, and $4,000 in Year 9, with all cash flows to be received at the end of the year. If you require a 14 percent rate of return, what is the present value of these cash flows?
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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Question
Transcribed Image Text:TIME VALUE OF MONEY
1. You deposited $1,000 in a savings account that pays 8 percent interest, compounded
quarterly, planning to use it to finish your last year in college. Eighteen months later, you
decide to go to the Rocky Mountains to become a ski instructor rather than continue in
school, so you close out your account. How much money will you receive?
a.$1,171
b$1,126
c.$1,082
d.$1,163
e. $1,008
2. A real estate investment has the following expected cash flows:
YearCash Flows
1$10,000
225,000
350,000
435,000
The discount rate is 8 percent. What is the investment's present value?
a.$103,799
b$ 96,110
c.$ 95,353
d$120,000
e.$ 77,592
3. Assume that you will receive $2,000 a year in Years 1 through 5, $3,000 a year in
Years 6 through 8, and $4,000 in Year 9, with all cash flows to be received at the
end of the year. If you require a 14 percent rate of return, what is the present
value of these cash flows?
a.$ 9,851
b.$13,250
c$11,714
d.$15,129
e.$17,353
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