Problem
i. You invest $5,000 in an account bearing interest at the rate of 10% per year. What will be the future value of your investment in five years?
ii. You will receive $10,000 in two years. If you had the money today you could invest it at 10% annual interest. What is the present value of the future amount you will receive?
iii. You invest $2,000 in an account each year bearing interest at the rate of 10% per year. What will be the future value of your investment in five years?
iv. You will receive $40,000 each year for the next ten years. If you had the money today you could invest it at 8% interest. What is the present value of the future amounts you will receive?
v. Calculate the value of a bond that matures in eight years, pays interest annually and has a $1,000 par value. The coupon interest rate is 11% and the market's required yield to maturity on a comparable risk bond is 12%.
vi. Calculate the value of a bond that matures in twenty years, pays interest semi-annually and has a $1,000 par value. The coupon interest rate is 10% and the market's required yield to maturity on a comparable risk bond is 12%.