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Asssignment 3

This document contains 17 questions related to principles of finance including present value, future value, compound interest, annuities, and perpetuities. The questions cover a range of financial calculations and require knowledge of time value of money concepts.

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Abdul Basit
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30 views2 pages

Asssignment 3

This document contains 17 questions related to principles of finance including present value, future value, compound interest, annuities, and perpetuities. The questions cover a range of financial calculations and require knowledge of time value of money concepts.

Uploaded by

Abdul Basit
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment 3

Principles of Finance
Instructor: Dr. Muhammad Nawaz

Q1. If the interest rate is 10% compounded annually then what is the present
value of $1000 to be received after 5 years.
Q2. You want to save some money in a bank with the expectation of receiving
$50,000 in 5 years. One bank has proposed a monthly compounding rate of
9.5%. How much money do you need to deposit in the bank today?
Q3. If a person gets $1000 at the end of the first year, $2000 at the end of the
second year, and $3000 at the end of the third year from any investment, what
will be his present value if the interest rate is 10% compounded annually?
Q4. What will be the future value at the end of the 5 years of $1,000 paying
today having 5% rate of interest compounding annually?
Q5. Jaffer has taken a loan of $ 10,000 from a bank for 3 years. After 4 years, he
has paid a total of $13,310. What is the annual compound interest rate?
Q6. You plan to borrow $389,000 now and repay it in 25 equal annual
instalments (payments will be made at the end of each year). If the annual
interest rate is 14%, how much will your annual payments be?
Q7. If you deposit $16,000 per year for 12 years (each deposit is made at the
end of each year) in an account that pays an annual interest rate of 14%, what
will your account be worth at the end of 12 years?
Q8. You are offered an annuity that will pay $24,000 per year for 11 years (the
first payment will occur one year from today). If you feel that the appropriate
discount rate is 13%, what is the annuity worth to you today?
Q9. You are offered an investment with a quoted annual interest rate of 13%
with quarterly compounding of interest. What is your effective annual interest
rate?
Q10. How many years will it take for $197,000 to grow to be $554,000 if it is
invested in an account with a quoted annual interest rate of 8% with monthly
compounding of interest?
Q11. If you deposit $15,000 per year for 9 years (each deposit is made at the
beginning of each year) in an account that pays an annual interest rate of 8%,
what will your account be worth at the end of 9 years?
Q13. How many periods will it take If you deposit $15,000 per year (each
deposit is made at the beginning of each year) in an account that pays an annual
interest rate of 8%, and account worth will be 202298.43 at the end of that
period.
Q14. You plan to accumulate $450,000 over a period of 12 years by making
equal annual deposits in an account that pays an annual interest rate of 9%
(assume all payments will occur at the beginning of each year). What amount
must you deposit each year to reach your goal?
Q15. You are offered an annuity that will pay $17,000 per year for 7 years (the
first payment will be made today). If you feel that the appropriate discount rate
is 11%, what is the annuity worth to you today?
Q16. Co. is selling a perpetuity contract that pays $1,800 monthly. The contract
currently sells for $95,000. What is the monthly return on this investment
vehicle?

Q17. Co. is trying to sell you an investment policy that will pay you and your
heirs $25,000 per year forever. If the required return on this investment is 7.2
percent, how much will you pay for the policy?

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