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What annual interest rate would you need to earn
Course:- Managerial Accounting
Reference No.:- EM131531051




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1. Which cash flow would you rather pay, $275 today or $325 in two years rf interest rates are 10 percent?

- Pay $325 in two years

- Pay $275 today

2. What is the value in year 5 of a $1,700 cash flow made in year 8 if interest rates are 10 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

3. What annual rate of return is earned on a $1,000 investment when it grows to $1,600 in four years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

4. What would be more valuable, receiving $500 today or receiving $625 In three years If Interest rates are 8 percent?

- Receiving $625 in future

- Receiving $500 today

5. What is the value in year 9 of a $1,600 cash flow made in year 6 if interest rates are 9 percent? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

6. What's the interest rate of a 7-year, annual $4,100 annuity with present value of $20,000? (Round your answer to 2 decimal places.)

7. Joey realizes that he has charged too much on his credit card and has racked up $5,900 in debt. if he can pay $150 each month and the card charges 17 percent APR (compounded monthly), how long will it take him to pay off the debt? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

8. Given a 7 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,450, $1,750, $1,750, and $1,850. (Do not round intermediate calculations and round your final answer to 2 decimal places.)

9. Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $615 in two weeks. What is the compounded annual rate implied by this 23 percent rate charged for only two weeks? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

10. What annual interest rate would you need to earn if you wanted a $600 per month contribution to grow to $54,500 in six years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Answered:-

Verified Expert

The assignment was related to the topic time value of money. Time Value of money is a basic concept in financial management which states that the value of money you have today is higher than the same amount you will receive at a future date.This will helps in calculating the present value & future value of an investment with help of discount factor and the discount rate is derived by considering the inflation, interest rate and risk premium.It will also helps in comparing investment alternatives.



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