Question

3.

Calculate the value of the cash flows at time 5. The interest rate is 10.13%.

0	1	2
$1,089	$2,208	$3,394

4. A company purchased an asset for $178,036 11 years ago. During that time, the asset grew at a rate of 0.71% per month. How much is it worth today?
5. You bought a stock for $13. You think the stock will have a return of 12.28%. How much will the stock be worth in 12 years? (Round to 2 decimal places.)
6. You just collected your school refund check of $795. You will invest it at an interest rate of 12.05%. How many years will it take to triple your money?

Answer 1

3.

Calculate the value of the cash flows at time 5. The interest rate is 10.13%.

0	1	2
$1,089	$2,208	$3,394

The value of cash flows at time 5 = 1,089 * (1 + 0.1013)^5 + 2,208 * (1 + 0.1013)^4 + 3,394 * (1 + 0.1013)^3

The value of cash flows at time 5 = 1,764.2335466739 + 3,248.0419217858 + 4,533.4492217946

The value of cash flows at time 5 = $9,545.7246902543

4. A company purchased an asset for $178,036 11 years ago. During that time, the asset grew at a rate of 0.71% per month. How much is it worth today?

11 years = 11 * 12 = 132 months

FV = PV * (1 + r)^n

The asset's worth today = 178,036 * (1 + 0.0071)^132

The asset's worth today = $452,991.962152481

5. You bought a stock for $13. You think the stock will have a return of 12.28%. How much will the stock be worth in 12 years?

FV = PV * (1 + r)^n

FV = 13 * (1 + 0.1228)^12

FV = $52.1881857961

6. You just collected your school refund check of $795. You will invest it at an interest rate of 12.05%. How many years will it take to triple your money?

FV = PV * (1 + r)^n

(1 + r)^n = FV/PV

n ln(1 + r) = ln(FV/PV)

n = ln(FV/PV)/ln(1 + r)

FV = 3 * 795

FV = 2,385

n = ln(2,385/795)/ln(1 + 0.1205)

n =9.6560066006 years

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