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1. Time Value of Money

a. $1 today is worth more to you than $1 in one year. Why?

b. What is the real future value of $10,000 which will sit in a savings account for 20 years, earning 4% interest compounded yearly during a period of 4% annual inflation?

c. What is the present value of an annuity which makes its first payment in 3 years, makes a total of 10 payments of $10,000 each year with an overall discount rate of 7%?

d. What is the PV of a perpetuity which pays $200 one year from today and then each year thereafter? Assume a discount rate of 8%.

e. What is the nominal future value of $10,000 one year from today if it can be invested in a portfolio that expects to earn, in real terms, 4% per year with inflation of 3% per year?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M9435309

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