Exam 2: How to Calculate Present Values

An equal-payment home mortgage is an example of an annuity.

Ms. Colonial has just taken out a $150,000 mortgage at an interest rate of 6% per year. If the mortgage calls for equal monthly payments for twenty years, what is the amount of each payment? (Assume monthly compounding or discounting.)

What is the present value of $10,000 per year perpetuity at an interest rate of 10%?

The discount rate is used for calculating the NPV is:

If the present value of $250 expected to be received one year from today is $200, what is the discount rate?

If the future value of $1 invested today at an interest rate of r% for n years is 9.6463, what is the present value of $1 to be received in n years at r% interest rate?

An investment at 10% nominal rate compounded continuously is equal to an equivalent annual rate of:

The rate of return on any perpetuity is equal to the cash flow multiplied by the price.

If you receive $1,000 payment at the end each year for the next five years, what type of cash flow do you have?

What is the present value of $5000 per year annuity at a discount rate of 10% for 6 years?

If the one-year discount factor is 0.8333, what is the discount rate (interest rate) per year?

An investment at 10.47% effective rate compounded monthly is equal to a nominal (annual) rate of:

What is the net present value of the following cash flow at a discount rate of 11%? $\frac { \mathrm { t } = 0 } { - 120,000 } \quad \frac { \mathrm { t } = 1 } { 300,000 } \quad - \frac { \mathrm { t } = 2 } { - 100,000 }$

Net present value is found by subtracting the required investment from the present value of future cash flows.

The value of a five-year annuity is equal to the sum of two perpetuities. One makes its first payment in year 1, and the other makes its first payment in year 6.

If the present value of a cash flow generated by an initial investment of $200,000 is $250,000, What is the NPV of the project?

If the present annuity factor is 3.8896, what is the present value annuity factor for an equivalent annuity due if the interest rate is 9%?

For $10,000 you can purchase a 5-year annuity that will pay $2504.57 per year for five years. The payments are made at the end of each year. Calculate the effective annual interest rate implied by this arrangement: (approximately)

Mr. William expects to retire in 30 years and would like to accumulate $1 million in the pension fund. If the annual interest rate is 12% per year, how much should Mr. Williams put into the pension fund each month in order to achieve his goal? Assume that Mr. Williams will deposit the same amount each month into his pension fund and also use monthly compounding.

If the present value annuity factor at 12% APR for 5 years is 3.6048, what is the equivalent future value annuity factor?