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FUTURE VALE OF AN ANNUITY |
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WHAT IS THE FUTURE VALUE OF A 5-YEAR ORDINARY ANNUITY THAT PROMISES TO PAY YOU $300 EACH YEAR? THE RATE OF INTEREST IS 7 PERCENT. Need Help Writing an Essay?Tell us about your assignment and we will find the best writer for your paper. Write My Essay For Me<pclass=”msonormal” style=”margin-left: 108pt; text-indent: 36pt;”>
| 6-7
FUTURE VALUE OF AN ANNUITY DUE
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| 6-8
PRESENT AND FUTURE VALUE OF A CASH FLOW STREAM |
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An investment pays you $100 at the end of each of the next 3 years. The investment will then pay you $200 at the end of Year 4, $300 at the end of Year 5, and $500 at the end of Year 6.
IF THE INTEREST RATE EARNED ON THE INVESTMENT IS 8 PERCENT, WHAT IS ITS PRESENT VALUE? WHAT IS ITS FUTURE VALUE? |
| 6-9
LOAN AMORTIZATION AND EFFECTIVE INTEREST RATE |
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You are thinking about buying a car, and a local bank is willing to lend you $20,000 to buy the car. Under the terms of the loan, it will be fully amortized over 5 years (60 months), and the nominal rate of interest will be 12 percent, with interest paid monthly.
WHAT WOULD BE THE MONTHLY PAYMENT ON THE LOAN? WHAT WOULD BE THE EFFECTIVE RATE OF INTEREST ON THE LOAN?
| 6-10
GROWTH RATES |
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Shalit Corporation’s 2002 sales were $12 million. Sales were $6 million 5 years earlier (in 1997). |
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(a.) |
TO THE NEAREST PERCENTAGE POINT, AT WHAT RATE HAVE SALES BEEN GROWING? |
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(b.) |
Suppose someone calculated the sales growth for Shalit Corporation in part (a) as follows: “Sales doubled in 5 years. This represents a growth of 100 percent in 5 years, so, dividing 100 percent by 5, we find the growth rate to be 20 percent per year.”
EXPLAIN WHAT IS WRONG WITH THIS CALCULATION. |
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