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Finance Week 5 Questions

P6: Determine the present values (PVs) if $5,000 is received in the future (i.e., at the end of each indicated time period) in each of the following situations:

a. 5% for 10 years

b. 7% for 7 years

c. 9% for 4 years

P9: Assume you are planning to invest $5,000 each year for 6 years and will earn 10% per year. Determine the future value (FV) of this annuity if your first %5,000 is invested at the end of the first year.

P10: Determine the present value (PV) now of an investment of $3,000 made one year from now and an additional $3,000 made two years from now if the annual discount rate is 4%.

P11: What is the present value (PV) of a loan that calls for the payment of $500 per year for 6 years if the discount rate is 10% and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for 10 years?

P12: Determine the annual payment on a $500,000, 12 % business loan from a commercial bank that is to be amortized over a five year period.

P13: Determine the annual payment on a $15,000 loan that is to be amortized over a 4 year period and carries a 10% interest rate. Prepare a loan amortization schedule for this loan.

P15: Assume a bank loan requires an interest payment of $85 per year and a principle payment of $1,000 at the end of the loan’s eight-year life.

a. AT what amount could this loan be sold for to another bank if loans of similar quality carried an 8.5% interest rate? That is, what would be the PV of this loan?

b. Now, if interest rates on other similar quality loans are 10%, what would be the PV of this loan?

c. What would be the PV of the loan if the interest rate is 8% on similar quality loans?

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