Time Value of Money
You deposit $1,000 in a savings account earning 6% annually. How much will you have in 3 years?
$1,191.02
Find the PV of a $500 annual payment for 5 years at 8%.
$1,996.36
Find the EAR for 8% APR, compounded quarterly.
8.24%
A bond with a 9% coupon matures in 15 years. Coupons are paid annually. If the yield on investments of similar risk is 7%, what is the most an investor should be willing to pay for this bond?
$1,182.16
A company just paid a dividend of $2.00 per share. The dividend is expected to increase by 5% per year indefinitely. If investors require a 10% rate of return, what is the fair price of this stock today?
$42.00
How much would you need to invest today to have $5,000 in 8 years if you earn 7% annually?
$2,910.05
Find the FV of a $200 annual payment for 10 years at 6%.
$2,636.16
Find the EAR for 10% APR, monthly compounding.
10.47%
A bond with a 6% coupon matures in 12 years. Coupons are paid annually. If the yield on investments of similar risk is 8%, what is the most an investor should be willing to pay for this bond?
$849.28
A company currently pays a $3.00 annual dividend, which is expected to grow by 2% per year indefinitely. If the stock currently sells for $25.25, what rate of return should investors expect to earn?
14.12%
You invest $2,000 today, and it grows to $3,000 in 5 years. What annual rate of return did you earn?
8.45%
If you deposit $150 monthly for 5 years at 9% APR, what’s the future value?
$11,313.62
Your credit card has 21% APR. What’s the periodic rate?
1.75%
A bond with a 10% coupon matures in 20 years. Coupons are paid semi-annually. If the yield on investments of similar risk is 9%, what is the most an investor should be willing to pay for this bond?
$2,012.09
Shares of a company sell for $21.00 per share and are expected to pay a dividend of $1.75 next year. Dividends are expected to grow by 3% per year indefinitely. What return should investors require on this stock?
11.33%
You want $10,000 in 6 years. If you can invest at 9%, how much do you need to deposit each year?
$1,329.20
What is the PV of this annuity due if the respective PV of the Ordinary Annuity is $2,000 with a rate of 7%?
$2,140.00
Find PV of $500, $1,000, $1,500 in years 1–3 at 6%.
$2,621.12
A bond with a 5% coupon matures in 10 years. Coupons are paid annually. If the yield on investments of similar risk is 6.5%, what is the most an investor should be willing to pay for this bond?
$892.17
Northstar Manufacturing has $50 par value preferred stock. It pays a dividend of $0.85, and the required rate of return is 8%. What is the value of this stock today?
$10.63
You invest $5,000 for 10 years and it grows to $10,000. You could have alternatively invested in an asset with a rate of return of 7.5%. Did you earn the higher return?
No
You need to accumulate $100,000 in 15 years by depositing at the beginning of each month into an account earning 5% APR. What monthly payment is needed?
$372.57
A&W is exploring a project with a cost of $70,000. It will have the following cash flows: $10,000, $15,0000, $20,000, and $40,000 in years 1–4 at 8%. Should A&W accept this project?
No
A bond with an 8% coupon matures in 14 years. Coupons are paid quarterly. If the yield on investments of similar risk is 9%, what is the most an investor should be willing to pay for this bond?
$2,820.47
A company just paid a dividend of $1.60 per share. The dividend is expected to grow by 3% per year indefinitely. If the stock currently sells for $12.10, what rate of return are investors earning?
16.62%