Answer the following five questions related to the time value of money. The interest rate is 8 percent per year and the number of periods is 5 years for all of the scenarios:

A. Assume the interest rate is 8 percent per year and the future value desired five years from now is $20,000. What is the *present value* needed right now to grow to this amount?

B. How much must be invested at the end of each year (i.e., *present value of ordinary annuity*) to have a $20,000 future value at the end of 5 years. Again, assume interest rate is 8 percent per year.

C. Assume you have $5,000 right now. What is the* future value of this single sum* after 5 years if you invest the $5,000 at 8 percent per year for 5 years.

D. Assume you invest $1,000 at the end of each year for 5 years. Again, the annual interest rate is 8 percent. What is the *future value of this ordinary annuity*?

E. What is an *annuity*? Explain the difference between an *ordinary annuity*and an *annuity due*.

##### Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"

### Like this:

Like Loading...