1.

If you wish to accumulate $140,000 in 13 years, how much must you deposit today in an account that
pays an annual interest rate of 14%?

2. What will $247,000 grow to be in 9 years if it is invested today in an account with an annual interest rate
of 11%?

3. In exchange for a R20 000 payment today, a well known company will allow you to choose one
of the alternatives shown in the following table. Your opportunity cost is 11%
PV
Alternative Single amount N
A R28,500 at end of 3 years I
B R54,000 at end of 9 years FV
C R160,000 at end of 20 years

a. Find the value today of each alternative.

b. Are all the alternatives acceptable – ie. worth R20,000 today?
c. Which alternative, if any, will you take?
PV I N FV
A R20,000 13% 3 R28,500
B R20,000 12% 9 R54,000
C R20,000 11% 20 R160,000
 FV R 140,000.00
I 14%
N 13
PV -R25,489.71

-R 247,000.00
9
11%
R631,835.12