Assignment for Week 6:
For Week 6, please turn in the answers to the following questions:
1. Why do we say money has
2. Why is it important for
business managers to be familiar with time value of money concepts?
3. Define Present Value.
4. Define Future Value.
5. What are present value and
future value interest factors? (as in
PVIF and FVIF)
6. (calculating future
value) You buy a 6 year, 8% CD for
$1,000. Interest is compounded
annually. How much is it worth at
7. (calculating present
value) What’s the present value of
$1,000 to be received in 8 years? (Your
required rate of return is 7% a year.)
8. (calculating the rate of
return) A friend promises to pay you
$600 two years from now if you loan him $500 today. What interest rate is your friend offering
9. (calculating the future
value of an annuity) If you invest $100
a year for 20 years at 7% annual interest, how much will you have at the end of
the 20th year?
10. (calculating the present
value of an annuity) How much would you
be willing to pay today for an investment that pays $800 a year at the end of
the next 6 years? (Your required rate of
return is 5% a year.)