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Financial Calculations Exercises

1) Mr. Basset expects to receive an annual payment of $2653.90 from an investment with a principal of $20,000, an interest rate of 8%, and term of 12 years. 2) When choosing between two car options, the second option which has a present value of $9,000 is preferable to the first option which has a present value of $9934.11. 3) For a person earning $20,000 annually for 30 years, the present value of their future salary is $995814.42. If they save $1000 annually for 30 years at 5% interest, the present value of their savings is $49790.70. Over 60 years at

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75 views1 page

Financial Calculations Exercises

1) Mr. Basset expects to receive an annual payment of $2653.90 from an investment with a principal of $20,000, an interest rate of 8%, and term of 12 years. 2) When choosing between two car options, the second option which has a present value of $9,000 is preferable to the first option which has a present value of $9934.11. 3) For a person earning $20,000 annually for 30 years, the present value of their future salary is $995814.42. If they save $1000 annually for 30 years at 5% interest, the present value of their savings is $49790.70. Over 60 years at

Uploaded by

Nguyệtt Hươngg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Văn Nguyệt Thu Hương - 1613340047

Exercise 12:
PV = 20000, n = 12 years, r = 0.08
C C C C
PV = r - <=> 20000 = 0.08 -
r∗( 1+r )n 0.08∗ (1+0.08 )12

 C = 2653.9
 Mr. Basset expects to receive an amount of 2653.9 per year

Exercise 10:
Scenario 1: If monthly payment:
C C 300 300
PV = 1000 + r - = 1000 + 0.1/12 -
r∗(1+r )n 0.1/12∗( 1+ 0.1/12)30

= 9934.11
Scenario 2: If discount offer: PV = 9000:
 The second option has a lower PV
 Choose Turtle Motors

Exercise 5:
a) PV of future salary payments:
C C 20000 20000
PV = r - = −3 % - = 995814.42
r∗( 1+r )n 3 %∗( 1−3 % )30

b) Saving/year = 20000 x 5% = 1000


1000 1000
PV30 years of savings = −3 % - 30 = 49790.7
−3 %∗( 1−3 % )

FVafter 60 years = PV x (1+i)30 = 49790.7 x (1 – 3%) 30 = 19966.4


c) If he plans to save this amount of money over the subsequent 20 years:
C C
 8% - 20 = 19966.4/ (1+8%)
20
8 %∗( 1+8 % )

 C = 436.31
 He can spend 436.31/year.

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