Chapter 4: Q8DQ. (page 279)
List five different financial applications of the time value of money.
The applications of the time value of money may involve loan valuation, bonds valuation, capital budgeting decisions, investment analysis, and personal finance analysis.
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Question: Mrs. Crawford will receive $7,600 a year for the next 19 years from her trust. If a 14 percent interest rate is applied, what is the current value of the future payments?
Stilley Resources bonds have four years left to maturity. Interest is paid annually, and the bonds have a \(1,000 par value and a coupon rate of 5 percent. If the price of the bond is \)841.51, what is the yield to maturity?
If you owe $35,000 payable at the end of eight years, what amount should your creditor accept in payment immediately if she could earn 13 percent on her money?
Your aunt offers you a choice of \(20,100 in 20 years or \)870 today. If money is discounted at 17 percent, which should you choose?
Cal Lury owes $10,000 now. A lender will carry the debt for five more years at 10 percent interest. That is, in this particular case, the amount owed will go up by10 percent per year for five years. The lender then will require that Cal pay off the loan over the next 12 years at 11 percent interest. What will his annual payment be?
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