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Worksheet 1 – Time Value of Money Scenario 1 Jonas Smith wants to accumulate a sum of money to pay for his MACC program. Rather than investing a single amount today, he decides to invest $5,000 a year over the next three years in a savings account account paying 8% interest compounded semi-annually. He decides to make the first payment to the bank immediately. How much will Jonas have available in his account at the end of three years? Scenario 2 Assume that you borrow $1,000 from a friend and intend to repay the amount in five equal annual installments beginning one year from today. Your friend wishes to be reimbursed for the loan at 7% per year. What is the required annual payment that must be made to repay the loan in five years? Scenario 3 On June 30, 2010, Greyson Inc. issued $200 million of 10% bonds. The bonds pay interest semi-annually and mature on June 30, 2030. They were sold to yield 12% interest. What is the selling price of the bond? Instructions: Using the tables at the back of Chapter 6, answer the questions above. You MUST show all work in order to receive credit for the problems. Tutorials for this Question

Worksheet 1 – Time Value of Money

Scenario 1

Jonas Smith wants to accumulate a sum of money to pay for his MACC
program. Rather than investing a single amount today, he decides
to invest $5,000 a year over the next three years in a savings account
account paying 8% interest compounded semi-annually. He decides to
make the first payment to the bank immediately. How much will Jonas
have available in his account at the end of three years?

Scenario 2

Assume that you borrow $1,000 from a friend and intend to repay the
amount in five equal annual installments beginning one year from today.
Your friend wishes to be reimbursed for the loan at 7% per year.
What is the required annual payment that must be made to repay the
loan in five years?

Scenario 3

On June 30, 2010, Greyson Inc. issued $200 million of 10% bonds.
The bonds pay interest semi-annually and mature on June 30, 2030.
They were sold to yield 12% interest. What is the selling price of the
bond?

Instructions:

Using the tables at the back of Chapter 6, answer the questions above.
You MUST show all work in order to receive credit for the problems.

Tutorials for this Question

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