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    Assignment 1 Time Value of Money: Name: ID: Course

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    shoaib akhtar
    This document contains solutions to two assignments related to the time value of money. Solution 5-18 calculates the present value of two cash flow streams at interest rates of 8% and 0%. Solution 5-19 calculates the future value of an annuity at ages 65 and 70, and uses the future values to calculate the equivalent annuity payments.

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    Assignment 1 Time Value of Money: Name: ID: Course

    Uploaded by

    shoaib akhtar
    10 views3 pages
    This document contains solutions to two assignments related to the time value of money. Solution 5-18 calculates the present value of two cash flow streams at interest rates of 8% and 0%. Solution 5-19 calculates the future value of an annuity at ages 65 and 70, and uses the future values to calculate the equivalent annuity payments.

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    This document contains solutions to two assignments related to the time value of money. Solution 5-18 calculates the present value of two cash flow streams at interest rates of 8% and 0%. Solution 5-19 calculates the future value of an annuity at ages 65 and 70, and uses the future values to calculate the equivalent annuity payments.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Download as docx, pdf, or txt
    10 views3 pages

    Assignment 1 Time Value of Money: Name: ID: Course

    Uploaded by

    shoaib akhtar
    This document contains solutions to two assignments related to the time value of money. Solution 5-18 calculates the present value of two cash flow streams at interest rates of 8% and 0%. Solution 5-19 calculates the future value of an annuity at ages 65 and 70, and uses the future values to calculate the equivalent annuity payments.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 3

    Name: Mahrish Akhtar ID: 022-20-121366 Course: PoF

    Assignment 1
    Time Value of Money

    Solution 5-18

    a) PRESENT VALUE AT 8%
    100 400 400 400 300
    Stream A = + + + +
    1.08 1.08 1.083 1.084 1.085
    1 2

    Stream A = 92.592 + 342.935 + 317.532 + 294.011 +204.174

    Stream A = $ 1251.244

    300 400 400 400 100


    Stream B = + + + +
    1.08 1.08 1.083 1.084 1.085
    1 2

    Stream B = 277.777 + 342.935 + 317.532 + 294.011 + 68.058


    Stream B = $ 1300.313

    b) PRESENT VALUE AT 0%
    Stream A = 100 + 400 + 400 + 400 + 300

    Stream A = $ 1600

    Stream B = 300 + 400+ 400 + 400 + 100

    Stream B = $ 1600

    Solution 5-19

    a) Future Value at Age 65


    Annuity payment ( 1+r )(t )−1
    Future Value =
    r
    ( 1+ 0.09 )25−1
    FV = 5000 0.09

    7.623
    FV = 5000 × 0.09

    FV = 423504.48

    b) Future Value at Age 70

    ( 1+ 0.09 )30 −1
    FV = 5000 0.09

    12.267
    FV = 5000 × 0.09

    FV = 681537.692
    c) Future values of annuity

    - Retiring at age 65
    Pv ( r )
    Annuity =
    1−( 1+r )−t
    423504.48 ( 0.09 )
    Annuity =
    1−( 1+0.09 )−20

    38115.4032
    Annuity = 0.822

    Annuity = 46369.103

    - Retiring at age 70
    Pv ( r )
    Annuity =
    1−( 1+r )−t
    681537.692 ( 0.09 )
    Annuity =
    1−( 1+0.09 )−15

    61338.392
    Annuity = 0.7254

    Annuity = 84558.026

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