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TVM QUIZ 2

This quiz contains a series of practice problems focused on time value of money concepts. It includes calculations for future value of annual deposits, present value of an annuity, loan payment calculations, and bond pricing based on coupon rates and yields. Each problem is followed by a detailed solution, allowing you to check your understanding and improve your financial analysis skills. Try solving the problems before viewing the answers to challenge yourself!

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TVM QUIZ 2

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Presentation Transcript

  1. PRACTICE PROBLEMS TVM QUIZ 2

  2. Practice problem #1 • You deposit 264 dollars in an account every year for 7 years that earns 5 percent annual interest. How much money is in your account 7 years from now? (your first deposit will be exactly 1 year from now and your last deposit will be 7 years from now)

  3. Problem #1 Solution

  4. Answer $2,149.49

  5. Practice problem #2 • You deposit 162 dollars in an account every year for 6 years that earns 5 percent annual interest. What is the present value of your deposits today (the present value of the annuity at time 0)? (your first deposit will be exactly 1 year from now and your last deposit will be 6 years from now)

  6. Problem #2 Solution

  7. Problem #2 Solution

  8. Answer $822.26

  9. Practice problem #3 • You decide to take out a loan for $4,470.04, and you will have to make 8 annual payments. If you receive a 5 percent annual interest rate, what is your annual payment? (your first annual payment will be 1 year from today).

  10. Problem #3 Solution

  11. Problem #3 Solution

  12. Answer $691.61

  13. Practice problem #4 • Suppose you want to save 2,750.28 dollars for a new car 52 months from now. If you plan on making 52 monthly payments, how much must you save each month assuming a 2 percent annual interest rate?

  14. Problem #4 Solution

  15. Problem #4 Solution

  16. Answer $50.68

  17. Practice problem #5 ? • What is the current price of a bond if it is priced to yield 10 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 5 percent?

  18. Problem #5 Solution Step 1. Step 2. Step 3.

  19. Problem #5 Solution Step 4. Step 5.

  20. Answer $688.44

  21. PRACTICE PROBLEM #6 • What is the current price of a bond if it is priced to yield 6 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 2 percent?

  22. Problem #6 Solution Step 1. Step 2. Step 3.

  23. Problem #6 Solution Step 4. Step 5.

  24. Answer $702.45

  25. If you still have trouble with any of the problems…..You have time up till next Friday to stop by my office…. 

  26. GOOD LUCK!

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