4-1
4-2 4-6 4-13 4-14
4-1 Future
Value of a Single Payment
If you
deposit $10,000 in a bank account that pays 10% interest annually, how much
will be in your account after 5 years?
4-2 Present
Value of a Single Payment
What is
the present value of a security that will pay $5,000 in 20 years if securities
of equal risk pay 7% annually?
4-6 Future
Value: ordinary Annuity versus Annuity Due
What is
the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If
this were an annuity due, what would its future value be?
4-13 Present
Value of an Annuity
Find the
present value of the following ordinary annuities.
a. $400
per year for 10 years at 10%
b. $200
per year for 5 years at 5%
c $400
per year for 5 years at 0%
d. Now
rework parts a, b, and c assuming that payments are made at the beginning of
each year; that is, they are annuities due.
4-14 Uneven
Cash Flow Stream
Find the
present values of the following cash flow streams. The appropriate interest
rate is 8%. (Hint: It is fairly easy to work this problem dealing with the
individual cash flows. However, if you have a financial calculator, read the
section of the manual that describes how to enter cash flows such as the ones
in this problem. This will take a little time, but the investment will pay huge
dividends throughout the course. Note that, when working with the calculator’s
cash flow register, you must enter CF0 = 0. Note also that it is quite easy to
work the problem with Excel.)
YEAR CASH
STREAM CASH STREAM
A B
1 $100 300
2 400 400
3 400 400
4 400 400
5 300 100
b. What
is the value of each cash flow stream at a 0% interest rate?
All
working must show in excel
TUTORIAL PREVIEW
4-14 Uneven Cash Flow Stream
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All working must show in excel
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Cash stream A
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Cash stream B
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year
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Cash flow
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year
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Cash flow
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0
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0
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$0.00
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0
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0
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$0.00
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1
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100
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$92.59
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1
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300
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$277.78
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File name: 4-1 4-2 4-6 4-13 4-14.xls File type: xls PRICE: $15
