Assignment:

Time Value of Money

1. If you deposit $1,000 at the end of each year in a savings account earning 4 percent
annually, how much will you have in 10 years?

FVA[ ( 1+ r ) n−1 /r ]
¿

1,000[ ( 1+ 0.04 ) ¿¿ ¿ 10−1 /0. 04 ]¿

FVA = 1,000(12.0061) = $12,006.1

2. If we need $8,000 in 6 years (and the discount rate is 10%), how much should be
deposited each year?

FVA= [ ( 1+ r ) n−1 /r ]
¿

8,000[ ( 1+ 0.10 )¿ ¿¿ 6−1/0. 10]¿

FVA = 8,000 / 7.7156 = $1,036.86

3. Calculate the present value of a $100 annuity received annually for 10 years when the
discount rate is 6%.

PVA= PMT(PVIFA)i,n
PVA = 100 (7.3601) = $736.01

4. Suppose Sparaco decides that they need to have $5,300 after eight years. How much
will they have to deposit at the end of each year to accumulate this amount. Interest
rate is 5 %?

FVA= PMT [ ( 1+ r ) n−1 /r ]

¿

5.300 [ ( 1+ 0.05 ) ¿¿ ¿ 8−1 /0.05 ]¿

FVA = 5,300 / 9.5491= $555.03