Exam 4: Introduction to Valuation: The Time Value of Money

You want to invest an amount of money today and receive back twice that amount in the future.You expect to earn 6 percent interest.Approximately how long must you wait for your investment to double in value?

You expect to receive $20,000 at graduation one year from now.You plan on investing it at 6 percent until you have $100,000.How long will you wait from now?

When you were born,your parents opened an investment account in your name and deposited $500 into the account.The account has earned an average annual rate of return of 4.8 percent.Today,the account is valued at $36,911.22.How old are you?

What is the future value of $4,900 invested for 8 years at 7 percent compounded annually?

You have $5,000 you want to invest for the next 45 years.You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.How much will you have at the end of the 45 years? How much will you have if the investment plan pays you 10 percent per year for the first 15 years and 6 percent per year for the next 30 years?

Assume the total cost of a college education will be $285,000 when your child enters college in 22 years.You presently have $35,000 to invest.What annual rate of interest must you earn on your investment to cover the cost of your child's college education?

Ben invested $5,000 twenty years ago with an insurance company that has paid him 5 percent simple interest on his funds.Charles invested $5,000 twenty years ago in a fund that has paid him 5 percent interest,compounded annually.How much more interest has Charles earned than Ben over the past 20 years?

Planters Bank pays 5 percent simple interest on its savings account balances,whereas Centura Bank pays 5 percent compounded annually.If you made a $12,000 deposit in each bank,how much more money would you earn from your Centura Bank account at the end of 20 years?