 # CUNY Bernard M Corporate Finance Time Value of Money questions Anonymous

### Question Description

Below are 8 questions for a corporate Finance Class. Due due is 2/23/19 at 12 PM.

1. Find the annual interest rate. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

 Present Value Future Value Time Period Annual Interest Rate \$100 \$126.25 4 years % 200 293.87 5 % 100 119.41 6 %

2.A zero-coupon bond that will pay \$1,000 in 9 years is selling today for \$424.10. What interest rate does the bond offer? (Do not round intermediate calculations. Enter your answer as a whole percent.)

 Interest rate %

3. A famous quarterback just signed a contract for \$13.6 million, providing \$3.4 million a year for 4 years. A less famous receiver signed a contract for \$12.6 million, providing \$3 million now and \$2.6 million a year for 4 years. The interest rate is 9%.

a. What is the PV of the quarterback's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

b. What is the PV of the receiver's contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

4.Calculate the present value of the following:

a-1. Annual payment of \$825 for 12 years at 3% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

a-2. Annual payment of \$625 for 17 years at 3% interest. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

9.You want to buy a new car, but you can make an initial payment of only \$1,600 and can afford monthly payments of at most \$750.

a. If the APR on auto loans is 12% and you finance the purchase over 48 months, what is the maximum price you can pay for the car? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. How much can you afford if you finance the purchase over 60 months? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

11. I now have \$21,000 in the bank earning interest of .75% per month. I need \$31,000 to make a down payment on a house. I can save an additional \$100 per month. How long will it take me to accumulate the \$31,000? (Do not round intermediate calculations. Round your answer to 2 decimal places. Use a financial calculator or Excel.)

Time Required: ______months

12. A retiree wants level consumption in real terms over a 25-year retirement. If the inflation rate equals the interest rate she earns on her \$385,000 of savings, how much can she spend in real terms each year over the rest of her life?

Available real annual spending: ___________

13. Suppose that you will receive annual payments of \$17,000 for a period of 10 years. The first payment will be made 4 years from now. If the interest rate is 5%, what is the present value of this stream of payments? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present Value:___________

Tutorbetie
School: UT Austin  Attached.

Running Head: Time Value of Money

1

Time Value of Money
Name
Institutional Affiliation
Date

Time Value of Money

2
QUESTION 1

𝐹𝑉

𝐹𝑉

PV = (1+𝑟)ᴺ

PV = (1+𝑟)ᴺ

293.87

126.25

119.41

200 = (1+𝑟)⁵

100 = (1+𝑟)⁴
(1 + 𝑟)⁴ =

𝐹𝑉

PV = (1+𝑟)ᴺ

126.25

(1 + 𝑟)⁵ =

100

(1 + 𝑟)⁴ = 1.2625
4
1 + r = √1.2625
1 + r = 1.06
R = 0.06 (6%)

100 = (1+𝑟)⁶

293.87
200

(1 + 𝑟)⁵ = 1.4694
5
1 + r = √1.4694
1 + r = 1.08
R = 0.08 (8%)
QUESTIO...

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