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5.1 Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the value of the investment in 10 years?

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5.1 Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the value of the investment in 10 years?

5.30 Patrick Seeley has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could double his money in four years. What interest rate would the investment have to yield in order for Patrick’s brother to deliver on his promise?

6.18 Growing perpetuity: You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $20,000 at the end of this year and subsequent payments that will thereafter grow at a rate of 3.4 percent annually. If you use a 9 percent discount rate for investment products, what is the present value of this growing perpetuity?

6.22 Computing annuity payment: Gary Whitmore is a high school sophomore. He currently has $7,500 in a money market account paying 5.65 percent annually. He plans to use this and his savings over the next four years to buy a car at the end of his sophomore year in college. He estimates that the car will cost him $12,000 in four years. How much should he invest in the money market account every year for the next four years if he wants to achieve his target?

This posting addresses the following questions:

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This posting addresses the following questions:
What does the concept “time value of money” mean? Why is the concept important? What are some practical applications of this concept for businesses? For individuals? What assumptions have to be accepted when discussing the “time value of money”?

You just won the TVM Lottery. You will receive $1milliion today plus another 10 annual payments that increase by

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You just won the TVM Lottery. You will receive $1milliion today plus another 10 annual payments that increase by $400,000 per year. Thus, in one year, you receive $1.4 million. In two years you get 1.8 million, and so on. If the appropriate interest rate is 9 percent, what is the present value of your winnings?

Determine the amount that must be deposited now at compound interest to provide the desired sum for each of the following:

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Determine the amount that must be deposited now at compound interest to provide the desired sum for each of the following:

1. Amount to be invested for 10 years at 6% per annum, compounded semiannually, to equal $17,000.
2. Amount to be invested for 2 1/2 years at 8% per annum, compounded quarterly, to equal $5,000.
3. Amount to be invested for 15 years at 12% per annum, compounded semiannually, then reinvested at 16% per annum, compounded quarterly, for five more years to equal $25,000.
4. Amount to be invested at 8% per annum, compounded semiannually for three years, then $5,000 more added and the entire amount reinvested at the same rate for another three years, compounded semiannually, to equal $12,500.

1. If you presently have $6,000 invested at a rate of 15%, how many years will it take for your investment to triple? (Round up to a whole number of years if necessary)

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1. If you presently have $6,000 invested at a rate of 15%, how many years will it take for your investment to triple? (Round up to a whole number of years if necessary)

2. You deposit $1,000 in a savings account that pays 8% compounded quarterly. How much money will you receive if you close the account after 18 months?