Introduction to Finance

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Tutorial (3) _Present Value, Future Value, Discounted rate and Number of Periods calculations.

▪ Details: 10 questions

▪ Duration of submission: 1 week

 Question 1:

You have deposited RM1000 today and the bank offers interest rate a 7% interest rate per annum. If you plan to save your money for 3 years, determine the future values in Years 1, 2 and 3.

Question 2:

Alvin has won a jackpot which pays her RM5, 000 per year for 3 years, beginning one year from today. Alvin wants to know the present value of the jackpot using a discount rate of 7%.

Question 3:

Remy will retire in 20 years. This year he wants to fund an amount of $15,000 to become available in 20 years. How much does he have to deposit into a pension plan earning 7% annually?

Question 4:

James needed a $1191 in 3 years to be off some debt. How much should James put in a saving account that earns 6% today?

Question 5:

Suppose we invest $200,000 in an investment that pays 4% interest per year, compounded quarterly. What will be the future value of this investment at the end of 10 years?

Question 6:

Suppose that the goal is to have $75,000 in an account by the end of four years. And suppose that interest on this account is paid at a rate of 5% per year, compounded semi-annually. How much must be deposited in the account today to reach this goal?

Question 7:

Consider the growth rate of dividends for ABC Corp. ABC Corp pays dividends each year. In 2006, for example, General Electric paid dividends of $0.317 per share of its common stock, whereas in 2016 the company paid $1.03 in dividends per share in 2016.

Question 8:

You can buy a security now for $1000 and it will pay you $1,191 three years from now. What annual rate of return are you earning?

Question 9:

Your friend deposits $100,000 into an account paying 8% per year. She wants to know how long it will take before the interest makes her a millionaire.

 Question 10:

If you can earn 12% on your investments, and you would like to accumulate $100,000 for your child’s education at the end of 18 years, how much must you invest annually to reach your goal?