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TVM QUIZ 2

PRACTICE PROBLEMS. TVM QUIZ 2. Practice problem #1.

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TVM QUIZ 2

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  1. PRACTICE PROBLEMS TVM QUIZ 2

  2. Practice problem #1 • You deposit 264 dollars in an account every year for 7 years that earns 5 percent annual interest. How much money is in your account 7 years from now? (your first deposit will be exactly 1 year from now and your last deposit will be 7 years from now)

  3. Problem #1 Solution

  4. Answer $2,149.49

  5. Practice problem #2 • You deposit 162 dollars in an account every year for 6 years that earns 5 percent annual interest. What is the present value of your deposits today (the present value of the annuity at time 0)? (your first deposit will be exactly 1 year from now and your last deposit will be 6 years from now)

  6. Problem #2 Solution

  7. Problem #2 Solution

  8. Answer $822.26

  9. Practice problem #3 • You decide to take out a loan for $4,470.04, and you will have to make 8 annual payments. If you receive a 5 percent annual interest rate, what is your annual payment? (your first annual payment will be 1 year from today).

  10. Problem #3 Solution

  11. Problem #3 Solution

  12. Answer $691.61

  13. Practice problem #4 • Suppose you want to save 2,750.28 dollars for a new car 52 months from now. If you plan on making 52 monthly payments, how much must you save each month assuming a 2 percent annual interest rate?

  14. Problem #4 Solution

  15. Problem #4 Solution

  16. Answer $50.68

  17. Practice problem #5 ? • What is the current price of a bond if it is priced to yield 10 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 5 percent?

  18. Problem #5 Solution Step 1. Step 2. Step 3.

  19. Problem #5 Solution Step 4. Step 5.

  20. Answer $688.44

  21. PRACTICE PROBLEM #6 • What is the current price of a bond if it is priced to yield 6 percent, has a $1,000 face value, has 10 years to maturity, pays semiannual coupon payments, and has a coupon rate of 2 percent?

  22. Problem #6 Solution Step 1. Step 2. Step 3.

  23. Problem #6 Solution Step 4. Step 5.

  24. Answer $702.45

  25. If you still have trouble with any of the problems…..You have time up till next Friday to stop by my office…. 

  26. GOOD LUCK!

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