Time value of money

May 11th, 2015
Studypool Tutor
Stanford University
Course: social science
Price: $10 USD

Tutor description

Ignore taxes. Show your work. If you use Excel, show the formula with the parameters, and the answer. If you use a formula, provide the standard formula, the formula with terms substituted, and the answer. If you use a calculator, show the inputs and the answer. 1. Your daughter has just given birth to your first grandchild. You decide to start a college fund for the child. You want the fund to have $300,000 in it when the child turns 18. You think you can get a return of 10% per year on your investment. How much should you deposit in the fund? 2.You want to buy a car. To do so, you will need to take out a loan in the amount of $19,000. The longest you are willing to pay on the loan is five years. The interest rate on this type of loan is 5.0% per year. How much will the equal monthly payments be? 3. You have been diligently saving to buy a boat. For the last 10 years, you have been putting $50 per month into a secret savings account paying .5% interest per year. You started wit

Word Count: 169
Showing Page: 1/3
Time value of moneySolution#1Present Value= Future cash flow (1+i)-nWe need $300,000 in after 18 turns.Future value= $300,000I= 10%n= 18PV= $300,000 (1+10%)-18PV=$53,957 We should deposit $53,953 today to get $300,000 after 18 turns with interest rate of 10%.Solution#2In this situation it is Annuity payments which are required to be paid for 5 years. Annuity payments are equally amounts of money required to pay for some certain period of time.PV= Annual cash flow* Annuity factorAnd we are required to find Annual cash flowsPV=$19,000Annuity factor= [1-(1+i)-n /i] Where i= 10% and n= 5PV= Annual cash flows* [1-(1+10%)-5 /10%]$19,000=Annual cash flows* 3.8 Annual Cash Flows= $19,000/3.8Annual Cash Flows= $5,000$5,000 will be equally payments for 5 years to pay loan of $19,000 with interest rate of 10%.Solution#3FV of annuity= annual cash flows* Ann

Review from student

Studypool Student
" Excellent work as usual "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1820 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors