FIN 691 Graded Valuation Problem Set

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School

Southern New Hampshire University *

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691-Q2135

Subject

Finance

Date

Apr 3, 2024

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xlsx

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Uploaded by CorporalPrairieDog2336

CALCULATING FUTURE VALUE OF A LUMP SUM AND PERIODIC INVEST You invest $750 today in an account that pays 8% per year. What is your account worth in 1 Initial investment $ 750.00 Interest rate 8% Number of years 10 Future account balance $ 1,619.19 Year Future Value (FV) 1 $ 810.00 2 $ 874.80 3 $ 944.78 4 $ 1,020.37 5 $ 1,102.00 6 $ 1,190.16 7 $ 1,285.37 8 $ 1,388.20 9 $ 1,499.25 10 $ 1,619.19 11 $ 1,748.73 12 $ 1,888.63 13 $ 2,039.72 14 $ 2,202.90 15 $ 2,379.13 Additional yearly investments $ 500.00 FV with additional investments $2,401.47 You also have the option to withdraw it early or leave your investment in the account for up FV of the account at the end of each year? If you invested an extra $50 to the account at the beginning of each year what would the fu years? 0 $- $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 Future Value

TMENTS 10 years? p to 15 years. What is the uture value be after 10 2 4 6 8 10 12 14 16 Future Value (FV) Future Value (FV) Year

TWO-WAY DATA TABLE: DISCOUNT RATE VS. Annual investment $ 5,500.00 Interest rate 7.5% Number of years 12 FV function $108,930.29 $108,930.29 3250 3500 3750 4000 4250 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% You intend to retire in 12 years and therefore plan to make 12 annual deposits of $5,500 (the current and each succeeding deposit made at the end of years 1, 2, . . . ,14. The assumed interest rate is 7.5% "FV" function. Wanting to see what the result would be if you contributed less than your maximum amount, or rece out to compute the range of possibilities. Create a two-way table to calculate the resulting FVs for bo annual investment amounts.

ANNUAL INVESTMENT 4500 4750 5000 5250 5500 t IRA max for those under age 55), with the first deposit made in T 0 (today) % What is the future value of all these deposits at the end of year 12? Use the eived an interest rate higher or lower than your original assumption, you set oth the range of possible interest rates, 0% to 15%, and the range of possible

CALCULATING PRESENT AND FUTURE VALUE OF AN ANNUITY INVESTMENT Interest rate 7% Year Cash flow at end of year Present Value of cash flow 4 $ 5,000.00 $ 3,814.48 5 $ 5,000.00 $ 3,564.93 6 $ 5,000.00 $ 3,331.71 7 $ 10,000.00 $ 6,227.50 Present value of all cash flows $ 16,938.62 Investment term (years) 7 PV of investment cost $6,227.50 FV of investment cost $10,000.00 PV of all investment cash flows $10,548.52 FV of investment cash flows $16,938.62 Difference in future value $6,390.10 You have the opportunity to invest a portion of your hard earned savings into a new investment. This i pay nothing for the first 3 years, $5,000 each for years 4–6, and a final payment of $10,000 in year 7. T interest rate of 7%. What is the PV for the cash flow of each year something is received (years 4–7)? If this investment only cost you $10,000, what is the difference in the future value of making the inves Solve for the FV using the PV of the $10,000 cost of the investment and the PV of all of the future cash 0 in payments for each.)

investment is likely to There is an assumed stment versus not? h flows. (Hint: Assume

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