05TP1 FM - Task Performance PDF

Preview

Summary

Download 05TP1 FM - Task Performance PDF

Description

NAME:

DATE:

March 22, 2021

SCORE:

Time Value of Money (25 points: 5 items x 5 points) Read and analyze each given scenario and provide what is asked. Show your complete solutions. 1. It is now January 1, 20x8. Today you will deposit P100, 000 into a savings account that pays 8%. a. If the bank compounds interest annually, how much will you have in your account on January 1, 20x9? Future Value = FVN = PV (1 + I)N FV1 = P100, 000 (1 + 0.08)1 FV1 = P100, 000 (1.08)1 = P108, 000 b. What will your January 1, 20x9 balance be if the bank uses quarterly compounding? Future Value = FVN = PV (1 + I)N FV1 = 100,000(1 + .02) 4 FV1 = 100,000(1.02) 4 = P108, 243.22

2. It is now January 1, 2x16, and you will need P100, 000 on January 1, 2x20. Your bank compounds interest at an 8% annual rate. How much must you deposit today to have a balance of P100, 000 on January 1, 2x20? Present Value = PV =

PV =

FVN (1 + I)N

100, 000 = P73, 502.98528 (1.08)4

3. If you deposited P200,000 in a bank account that pays 6% interest annually, how much will be in your account after five (5) years? Future Value = FVN = PV (1 + I)N FV1 = P200, 000 (1.06)5 = P267, 645.12 4. What is the present value of a security that will pay P290, 000 in 20 years if securities of equal risk pay 5% annually? Present Value = PV =

FVN (1 + I)N

PV = 290,000 = P109, 297.95 (1.05)20

5. What is the future value of a 5%, 5-year ordinary annuity that pays P8, 000 each year? If this was an annuity due, what would be its future value? N (1+ I ) −1 Future Value of an ordinary annuity: FVA N = PMT I

[

FVA N =8, 000

FVA N =8, 000

[ [

(1+0.05)5−1 0.05 5

(1.05) −1 0.05

]

] FVAN = P 44, 205.05

Future Value of an annuity due: FVA due = FVAordinary (1+I) FVAdue = 44, 205.05 (1+0.05) = 44, 205.05 (1.05) FVAdue = P 46, 415.30

]...