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FM Practice

The document presents a series of financial calculations involving future values, present values, and annuities based on various investment scenarios and interest rates. It includes examples of investments, savings, and cash flow evaluations over specified time periods. The calculations are aimed at determining the best financial options based on given rates and timeframes.

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rubabhospital.lahore
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2 views2 pages

FM Practice

The document presents a series of financial calculations involving future values, present values, and annuities based on various investment scenarios and interest rates. It includes examples of investments, savings, and cash flow evaluations over specified time periods. The calculations are aimed at determining the best financial options based on given rates and timeframes.

Uploaded by

rubabhospital.lahore
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1. You invest $5,000 today at 6% annual interest.

What will be the future value after 5


years?
2. What will be the value of an investment of $10,000 after 3 years if the annual interest
rate is 8%?
3. Calculate the future value of $2,500 invested for 10 years at an annual interest rate of
5%.
4. What is the present value of $10,000 to be received after 7 years if the discount rate is
9% annually?
5. How much must be invested today to receive $15,000 after 4 years if the annual
discount rate is 6%?
6. You will receive $8,000 after 5 years. If the annual discount rate is 7%, what is the
present value?
7. You deposit $2,000 at the end of each year in an account earning 5% annually. What
will be the future value after 10 years?
8. You save $5,000 per year for 15 years in a retirement account that earns 7%
annually. What will be the accumulated amount?
9. If you deposit $3,000 each year for 6 years into a savings account earning 6% per
annum, how much will you have at the end of 6 years?
10. You are required to make annual payments of $1,200 for 5 years. If the discount rate
is 8% annually, what is the present value of this annuity?
11. You expect to receive $10,000 per year for 8 years from a rental property. If the
annual interest rate is 6%, what is the present value of this income stream?
12. A company promises to pay you $7,000 per year for the next 10 years. If the interest
rate is 9%, what is the value of this offer today?
13. You can either receive $10,000 today or $2,500 per year for 5 years. If the discount
rate is 6%, which option has a higher present value?
14. You are offered $15,000 today or $4,000 annually for 4 years.
If the annual discount rate is 7%, which option is financially better?
15. Option A: $18,000 lump sum today
Option B: $5,000 per year for 5 years
If the interest rate is 8% per annum, which option should you choose?
16. You can receive $12,000 today or $3,500 per year for 4 years.
At a discount rate of 6%, calculate the present value of both options and decide which
is preferable.
17. You are promised to receive $1,000 per year forever, starting one year from today.
If the discount rate is 8%, what is the present value of this perpetuity?
18. A charitable foundation is planning to make $5,000 annual donations forever to a
school.
If the school's required rate of return is 6%, what is the present value of the donation.
19. You are offered two options:

• Option A: Receive $3,000 per year forever


• Option B: Receive $3,000 per year for 25 years

If the discount rate is 6%, which option has a higher present value?

20. You are evaluating an investment opportunity that provides the following cash flows:
• Years 1 to 5: You will receive $3,000 per year (ordinary annuity).
• Year 8: You will receive a lump sum of $10,000.

The required rate of return (discount rate) is 8% annually.

21. You’re offered a retirement package with the following benefits:


A guaranteed annual pension of $20,000 for 5 years starting one year from now.
A lump sum of $50,000 at the end of Year 6.
The discount rate is 7%.
What is the present value of the package today?
22. You are evaluating a real estate investment that provides:
• Rental income of $12,000 per year for 4 years
• A property resale value of $100,000 in Year 5
If the required return is 6%,

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