BUSN 5200 Week 6 Homework
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BUSN 5200 Week 6 Homework
For
Week 6, please turn in the answers to the following questions:
1. Why
do we say money has time value?
2. Why
is it important for business managers to be familiar with time value of money
concepts?
3.
Define Present Value.
4.
Define Future Value.
5. What
are present value and future value interest factors? (as in PVIF and FVIF)
6.
(calculating future value) You buy a 6 year, 8% CD for $1,000. Interest is
compounded annually. How much is it worth at maturity?
7.
(calculating present value) What’s the present value of $1,000 to be received
in 8 years? (Your required rate of return is 7% a year.)
8.
(calculating the rate of return) A friend promises to pay you $600 two years
from now if you loan him $500 today. What interest rate is your friend offering
you?
9.
(calculating the future value of an annuity) If you invest $100 a year for 20
years at 7% annual interest, how much will you have at the end of the 20th
year?
10.
(calculating the present value of an annuity) How much would you be willing to
pay today for an investment that pays $800 a year at the end of the next 6
years? (Your required rate of return is 5% a year.)
Case
Study Tasks:
1.
Refer to the Case Study topic lecture on the Week 5 Content page. Using the
information you obtained last week, complete the Part 3, Ratio Analysis
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