# S.O.S. Mathematics CyberBoard

Your Resource for mathematics help on the web!
 It is currently Sun, 19 May 2013 05:52:22 UTC

 All times are UTC [ DST ]

 Page 1 of 1 [ 4 posts ]
 Print view Previous topic | Next topic
Author Message
 Post subject: Time Value of MoneyPosted: Fri, 5 Feb 2010 23:55:09 UTC
 Member

Joined: Sun, 18 Nov 2007 01:49:55 UTC
Posts: 24
Please help me with the following questions step by step! I can't get to the right answers. I know it's a lot of questions... I hope you can help me by tonight! Thanks.

You just won the lottery. Receive \$1 million today and another 10 annual payments that increase by \$400k yearly. If the appropriate interest rate is 10%, find PV.

My work:

PV = 400 000 ((1 - (1/1.1^10))/.1) = 2 457 826.84

What is PV of \$2k yearly at 12% discount rate if first payment is received 9 years from now and last payment is received 25 years from now.

My work:

PV = 2000 ((1 - 1/1.12^16)/.12) = 13 947.97

I also tried the following...

PV = 2000/1.12^9 + 2000/1.12^25 = 838.87

A 15 year annuity pays \$1.5k monthly and payments are made at end of each month. If interest rate is 15% compounded monthly for first 7 years and then 12% compounded monthly. Find PV of annuity.

My work:

k = .15/12 = 0.0125
k = .12/12 = .01

PV1 = 1500 ((1 - 1/1.0125^84)/.0125) = 77 733.28

PV2 = 1500 ((1 - 1/1.01^96)/.01 = 92 291.55

PV Total = PV1 + PV2 = 170 024.83

Given 6.5% interest yearly, what is the value of t = 7 of a perpetual stream of \$3k payments that begin at t = 15.

My work:

I'm not sure if I understand the question, but I'm assuming that the value of the whole investment is \$3k so...

3000 = CF/.065
195 = CF

A 5-year annuity of 10 \$6k semiannual payments will begin 9 years from now (first payment 9.5 years from now). If discount rate is 12% compounded monthly, what is the value of this annuity in 5 and 3 years from now? Find also the current value.

My work:

k = .12/12 = .01

(1.01)^6 - 1 = .06152 = k

PV5 = 6000((1 - 1/1.06152^5.5)/0.6152) = 27 298.08
PV3 = 6000((1 - 1/1.06152^3.5)/0.6152) = 18 391.04
PV = 6000((1 - 1/1.06152^0.5)/0.6152) = 286.83

t = 5, 27 194.83
t = 3, 21 417.72
t = 0, 14 969.38

Top

 Post subject: Re: Time Value of MoneyPosted: Sat, 6 Feb 2010 05:01:19 UTC
 Member of the 'S.O.S. Math' Hall of Fame

Joined: Sun, 24 Jul 2005 20:12:39 UTC
Posts: 3688
Location: Ottawa Ontario
Macleef wrote:
A 5-year annuity of 10 \$6k semiannual payments will begin 9 years from now (first payment 9.5 years from now). If discount rate is 12% compounded monthly, what is the value of this annuity in 5 and 3 years from now? Find also the current value.

My work:
(1.01)^6 - 1 = .06152 = k
PV = 6000((1 - 1/1.06152^0.5)/0.6152) = 286.83

t = 0, 14 969.38

You're getting the effective rate ok...but nothing else!

I'll do the current value for you, but that's it...

Step 1: get PV of the 5 year flow:
6000[(1 - 1/1.06152^10) / .06152] = 43,844.21

Step 2: that's the PV as at 9 years from now; we need the PV now:
43844.21 / 1.06152^18 = 14,969.38

Good luck.

_________________
I'm not prejudiced...I hate everybody equally!

Top

 Post subject: Re: Time Value of MoneyPosted: Sat, 22 Oct 2011 16:44:33 UTC
 S.O.S. Newbie

Joined: Sat, 22 Oct 2011 16:38:07 UTC
Posts: 1
@Macleef that was really informative cos i was having similar question but with this thread am good now Thanks Denis for the info.

Top

 Post subject: Re: Time Value of MoneyPosted: Sat, 22 Oct 2011 17:36:32 UTC
 Member of the 'S.O.S. Math' Hall of Fame

Joined: Sun, 24 Jul 2005 20:12:39 UTC
Posts: 3688
Location: Ottawa Ontario
exdy wrote:
@Macleef that was really informative cos i was having similar question but with this thread am good now Thanks Denis for the info.

Well then buddy, why don't you post yours: may help someone else...
or are you not interested in helping?

_________________
I'm not prejudiced...I hate everybody equally!

Top

 Display posts from previous: All posts1 day7 days2 weeks1 month3 months6 months1 year Sort by AuthorPost timeSubject AscendingDescending
 Page 1 of 1 [ 4 posts ]

 All times are UTC [ DST ]

#### Who is online

Users browsing this forum: No registered users

 You cannot post new topics in this forumYou cannot reply to topics in this forumYou cannot edit your posts in this forumYou cannot delete your posts in this forum

Search for:
 Jump to:  Select a forum ------------------ High School and College Mathematics    Algebra    Geometry and Trigonometry    Calculus    Matrix Algebra    Differential Equations    Probability and Statistics    Proposed Problems Applications    Physics, Chemistry, Engineering, etc.    Computer Science    Math for Business and Economics Advanced Mathematics    Foundations    Algebra and Number Theory    Analysis and Topology    Applied Mathematics    Other Topics in Advanced Mathematics Other Topics    Administrator Announcements    Comments and Suggestions for S.O.S. Math    Posting Math Formulas with LaTeX    Miscellaneous