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- 2. Find the future value of OMR10,000 invested now after five years if the annual interest rate is 8 percent. a. What would be the future value if the interest rate is a simple interest rate? b. What would be the future value if the interest rate is a compound interest rate?1. This problem relates to Future Value, and Future income streams. Assume continuous compounding of interest. (a) Find the present value of a single future payment of FV = $50,000 to be made 20 years from now, assuming an interest rate of 5 percent. (b) Suppose you want a future income stream (annual payments) of FV (t) = 500t for 20 years. Find the present value of this income stream, assuming an interest rate of 5 percent.Suppose you have an investment offer that guarantees an average investment gain of $1,000 per year. (a) What is the average rate of change (in dollars per year) of this investment? $? per year (b) If the value of the investment today is $10,000, what will be the value (in dollars) of the investment in 2 years? $?
- What is the present value of an investment that will pay $1,000 in one year's time, and $1,000 every year after that, when the interest rate is 8%?a) You invest 155 000 TL for a year. At the end the year, you have 174 375 TL net in your account. If the inflation realizes at %10 fot this year, calculate real rate of return? Can real interest rates be negative? Give a simple example?You are required to find how long it will take a sum of money (or anything else) to grow to some specified amount with a certain compound interest rate. Specifically, if a company’s investment has a real rate of return of 4% per year and the inflation rate is 6% per year, approximately how long will it take for the investment to triple?
- 3. Suppose an investment is expected to generate income at the rate of R(t) = 200,000 dollars/year for the next 4 years. Find the present value and the future value of this investment if the prevailing interest rate is 8%/year compounded continuously. (Round your answer to the nearest whole number.)4. You are planning to invest OMR 2,500 today for three years at a nominal interest rate of 9 percent with annual compounding. a) What would be the future value of your investment? b) Now assume that inflation is expected to be 3 percent per year over the same three-year period.What would be the investment’s future value in terms of purchasing power? c) What would be the investment’s future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?1. $30,000 is invested at a compounded yearly interest rate of 6%, with the interest compounded constantly. (a) How long do you think it will take for the value of this original investment to double? (b) How long do you think it will take for this initial investment to quadruple in value? (c) How long do you think it will take for this initial investment to double in value? (d) Is there a pattern here? (d) Can you spot the pattern? How long will it take to achieve five times the starting sum? What if you get seven times the amount you started with? etc.
- Suppose that you have an investment that earns 0% in the first year, but 20.7% in the second year. What rate of interest, compounded annually, would yield the same return after two years? (Answer in percentage)Future worth, F, has to be found from a present amount, P, five years from now at an interest rate of 6% per year, compounded monthly. What interest rate must be used in the F/P factor, (F/P,i%,n), when n is 10? How many years will it take an investment to triple if the interest rate is 4% compounded monthly? Question 1 (U Future worth, 5, has to be found from a present amount, P. five years from now at an interest rate of 6% per year, compounded monthly. What interest rate must be used in the F/P factor, (F/P.1%,n), when n is 10? O a) Between 0.020-0.021 O b) None of the answers is correct O c) Between 0.040-0.041 d) Between 0.070-0.071 e) Between 0.010-0.0111. Suppose you can save $200 per year at the end of each year for 15 years and earn 7.49% interest per year. However, you cannot start saving for five years. What is the present value of this annuity? 2. What are the annual payments for a 4-year $4,000 loan if the interest rate is 9% per year? Make up a loan amortization schedule. 3. Consider the following future value problem. The respective cash flows for t = 0, 1, 2, and 3 are $3,000, $2,000, $8,000, and $5,000 and the discount rate is ten percent. What is the future value at t = 4? 4. You are offered a signing bonus of $2,000,000 or a future payment of $2,500,000 at the end of three years from now. If you can earn 7% on invested funds, would you take the signing bonus or wait for the future payment?