Exam 2: How to Calculate Present Values

You would like to have enough money saved to receive a growing annuity for 25 years, growing at a rate of 4% per year, the first payment being $60,000 after retirement, so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal? (assume that the growing perpetuity payments start one year from the date of Your retirement. The interest rate is 12%)?

If the one-year discount factor is 0.90, what is the present value of $120 to be received one year from today?

An annuity is defined as

In the amortization of a mortgage loan with equal payments, the fraction of each payment devoted to interest steadily increases over time and the fraction devoted to reducing the loan decreases steadily.

If the future value annuity factor at 10% and 5 years is 6.1051, calculate the equivalent present value annuity factor

The opportunity cost of capital is higher for safe investments than for risky ones.

You would like to have enough money saved to receive a growing annuity for 20 years, growing at a rate of 5% per year, the first payment being $50,000 after retirement. That way, you hope that you and your family can lead a good life after retirement. How much would you need to save in your retirement fund to achieve this goal.(assume that the growing annuity payments start one year from the date of your retirement. The interest rate is 10%)?

Mr. Hopper is expected to retire in 30 years and he wishes accumulate $1,000,000 in his retirement fund by that time. If the interest rate is 12% per year, how much should Mr. Hopper put into the retirement fund each year in order to achieve this goal?

The opportunity cost of capital for a risky project is

If the present value of $600 expected to be received one year from today is $400, what is the one-year discount rate?

The present value of $100 expected in two years from today at a discount rate of 6% is:

Which of the following statements regarding the net present value rule and the rate of return rule is not true?

An annuity is an asset that pays a fixed sum each year for a specified number of years.

If the present value of the cash flow X is $240, and the present value cash flow Y $160, then the present value of the combined cash flow is:

The present value of a future cash flow can be found by dividing it by an appropriate discount factor.

The present value formula for one period cash flow is:

An investment at 12% nominal rate compounded monthly is equal to an annual rate of:

The net present value formula for one period is: I. NPV = C0 + [C1/(1 + r)] II) NPV = PV required investmen III) NPV = C0/C1

If the present value of $1.00 received n years from today at an interest rate of r is 0.3855, then what is the future value of $1.00 invested today at an interest rate of r% for n years?

What is the present value of $1000 per year annuity for five years at an interest rate of 12%?