1. Complete the table
Present value Rate Time Compounding Frequency Table Factor Future Value
$5,000 12% 2yrs Annual ? ?
$5,000 12% 2yrs Semiannual ? ?
$5,000 12% 2yrs Quarterly ? ?
$5,000 12% 2yrs Monthly ? ?
2. Cindy has decided to retire in 24 yrs. She has $30,000 available today and wants to invest the money to supplement her pension plan.
a. assume Cindy wants to accumulate $150,000 by her retirement date. Will she achieve her goal if she invests $30,000 today and earns 6%? Please show calculations to support your yes/no answer.
b. If cindy invests a total of $30,000 through a series of 24 equal annual installments at the end of the year instead of a single amount, would Cindy accumulate the desired $100,000 at the 6% annual interest? The first investment would be one year from today. Please show calculations to support answer.
3. Smith plans to choose one of 3 investments. Investment A pays $2,500 at the end of each year for 3 years. Investment B pays $8,500 at the end of 5 years. Investment C pays $1,000 at the end of each year for 4 years and pays $4,000 at the end of the 5th yr. Smith requires a rate of return of 7% on each of these investments.
a. what is the present value of Investment A
b. what is the present value of Investment B
c. what is the present value of Investment C