h.A 20-year-old student wants to save $3 a day for her retirement. Every day she places $3 in a drawer. At theend of each year, she invests the accumulated savings ($1,095) in a brokerage account with an expectedannual retum of 12%.(1) If she keeps saving in this manner, how much will she have accumulated at age 65?(2)If a 40-year-old investor began saving in this manner, how much would he have at age 65?(3)How much would the 40-year-old investor have to save each year to accumulate the same amount at65 as the 20-year-old investor?i. What is the present value of the following uneven cash flow stream? The annual interest rate is 10%.1Yearsj. (1)(2)(3)m.(2)(3)(1)(2)0ㅏ00+2+$300$100Will the future value be larger or smaller if we compound an initial amount more often than annually(e.g., semiannually, holding the stated (nominal) rate constant)? Why?What is the future value of $100 after 3 years under 10% semiannual compounding? quarterlycompounding?k. When will the EAR equal the nominal (quoted) rate?1. (1) What is the value at the end of Year 3 of the following cash flow stream if interest is 10% compoundedsemiannually? (Hint You can use the EAR and treat the cash flows as an ordinary annuity or use theperiodic rate and compound the cash flows individually.)+3+$300Define (a) the stated (or quoted or nominal) rate, (b) the periodic rate, and (c) the effective annual rate(EAR or EFF%).41-$50What is the EAR corresponding to a nominal rate of 10% compounded semiannually? compoundedquarterly? compounded daily?2+$100+4+ +$1006 PeriodsH$100What is the PV?What would be wrong with your answer to Parts 1(1) and 1(2) if you used the nominal rate, 10%, ratherthan the EAR or the periodic rate, INOM/2 = 10%/2 = 5%, to solve the problems?Construct an amortization schedule for a $1,000, 10% annual interest loan with three equal installments.What is the annual interest expense for the borrower and the annual interest income for the lenderduring Year 2? TIME VALUE OF MONEY ANALYSIS You have applied for a job with a local bank. As part of its evaluationprocess, you must take an examination on time value of money analysis covering the following questions:a. Draw time lines for (1) a $100 lump sum cash flow at the end of Year 2:01an ordinary annuity of $100 per yearfor 3 years; and (3) an uneven cas Graphical user interface, text, application $50 at the end of Years 0 through 3.b. (1) What's the future value of $al compounding?(2)What's the prosent value of $ Description automatically generatedstrate is 10%, annual compounding?C.d.e.What annual interest rate would cause $100 to grow to $125.97 in 3 years?If a company's sales are growing at a rate of 20% annually, how long will it take sales to double?What's the difference between an ordinary annuity and an annuity due? What type of annuity is shownhere? How would you change it to the other type of annuity?10ㅏ2+$100031$100$100f. (1)What is the future value of a 3-year, $100 ordinary annuity if the annual interest rate is 10%?What is its present value?(2)(3) What would the future and present values be if it was an annuity due?8.A 5-year $100 ordinary annuity has an annual interest rate of 10%.(1)What is its present value?(2)(3)What would the present value be if it was a 10-year annuity?What would the present value be if it was a 25-year annuity?(4) What would the present value be if this was a perpetuity?

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h. A 20-year-old student wants to save $3 a day for her retirement. Every day she places $3 in a drawer. At the end of each year, she invests the accumulated savings ($1,095) in a brokerage account with an expected annual retum of 12%. (1) (2) (3) If she keeps saving in this manner, how much will she have accumulated at age 65? If a 40-year-old investor began saving in this manner, how much would he have at age 65? How much would the 40-year-old investor have to save each year to accumulate the same amount at 65 as the 20-year-old investor?

h. A 20-year-old student wants to save $3 a day for her retirement. Every day she places $3 in a drawer. At the end of each year, she invests the accumulated savings ($1,095) in a brokerage account with an expected annual retum of 12%. (1) (2) (3) If she keeps saving in this manner, how much will she have accumulated at age 65? If a 40-year-old investor began saving in this manner, how much would he have at age 65? How much would the 40-year-old investor have to save each year to accumulate the same amount at 65 as the 20-year-old investor?

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 1hM

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Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions. Draw time lines for: (a) a $2000 lump sum cash flow at the end of year 4, (b) an ordinary annuity of $1000 per year for 5 years, and (c) an uneven cash flow stream of -$450, $1000, $650, $850 and $500 at the end of years 0 through 4.
Assume that you are nearing graduation and have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination that covers several financial analysis techniques. The first section of the test addresses time value of money analysis. See how you would do by answering the following questions. Draw time lines for (a) a $2000 lump sum cash flow at the end of year 4, (b) an ordinary annuity of $1000 per year for 5 years, and (c) an uneven cash flow stream of -$450, $1000, $650, $850 and $500 at the end of years 0 through 4. What is the future value of an initial $1000 after 5 years if it is invested in an account paying 5% annual interest? What is the present value of $1000 to be received in 4 years if the appropriate interest rate is 5%? We sometimes need to find out how long it will take a sum of money (or anything else) to grow to some specified amount. For example, if a company's sales for 2020 is $1000 and expected to grow…
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