International Finance Term Project文档.docVIP

Name: Real Estate Investments/Analysis Spring 2009 Professor Harrison Quiz #1 -- Time Value of Money Review The following problems are designed to provide a review of many of the basic calculations you learned to perform in your previous finance curriculum which will come in useful/necessary throughout this semester. If you are unable to accurately answer these questions, please review these concepts immediately. Good-luck! 1. Which amount is worth more at 8.50% compounded annually: $1,000 in hand today or $2,000 due in 8 years? 2. What is the present value of a perpetuity of $1,500 per year if the appropriate discount rate is 7.25%? 3. Your company is planning to borrow $100,000 on a 7-year, 11.00%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the third year will represent repayment of principal? 4. As manager of Gotham Jewelry, you want to sell on credit, giving customers 3 months in which to pay. However, you will have to borrow from the bank to carry the accounts payable. The bank will charge a nominal 14 percent, but with monthly compounding. You want to quote a nominal rate to your customers (all of whom are expected to pay on time) which will exactly cover your financing costs. What nominal annual rate should you quote to your customers? 5. To the closest year, how long will it take $35,000 to double if it is deposited and earns 6.25% compounded annually? 6. What is the present value of $75,000 to be received 10 years from today if the interest rate is 7.35% compounded continuously? 7. What is the future value, in 25 years, of a $1,000 deposit invested at 9.50%, compounded continuously? 8. Suppose your Professor currently has no savings, but wants to retire in 30 years as a millionaire. If he can earn 8.75%, compounded annually