Finance
Answers:
Solution 1:
01 2 3 4 5
$900 $400
Cash flow = $900 (3year), $400 (4year)
t=0
t=5
r= 10%
PV at t= 0
1. PV = FV / (1+ r) ^ n
= $900 / (1 + 0.10) ^ 3
= $676.18
2. PV = FV / (1+ r) ^ n
= $400 / (1 + 0.10) ^ 4
= $273.21
FV at t= 5
1. FV = PV * (1 + r) ^ n
= $900 * (1 + 0.10) ^ 2
= $1089
2. FV = PV * (1 + r) ^ n
= $400 * (1 + 0.10) ^ 1
= $440
Solution 2:
Years 01 2 3 4 5
$3000$3000 $3000 $3000 $3000
Pmt = $250 pm = $3000 annual
Total payment = $3000 * 5year = $15000
t = 60 months = 5 years
r = 0.5% pm = 6% annual
What you are borrowing? PV=?
PV = pmt/ (1 + r)^t
= $15000/ (1 + 0.06)^5
= $15000/ 1.338
PV = $ 11,208.8
Solution 3:
1 2 3 4
$50
Investment in Future = $50
t = 4 years
r = 10%
PV = ?
PV = FV / (1 + r)^4
= $50/ (1 + 0.10)^4
= $50/ 1.464
PV = $ 34.15
Solution 4:
Pmt = $250 pm = $3000 annual
Number of years = 20years
R = 1% pm = 12% annual
FVA = ?
FVA = Pmt * FVIFA r,n
= Pmt * 1/r * [(1 + r)^n -1]
= $3000 * 1/0.12 * [(1 + 0.12)^20 - 1]
= $3000 * 1/0.12 * [8.646]
= $3000 * 8.646/ 0.12
= $3000 * 72.05
FVA = $216,157.3
PVA = ?
PVA = Pmt * PVIFA r,n
= Pmt * 1/r * [1- 1/ (1 + r)^n]
= $3000 * 1/0.12 * [1- 1/ (1 + 0.12)^20]
= $3000 * 1/0.12 * [0.896]
= $3000 * 0.896/ 0.12
= $3000 * 7.496
PVA = $22,408
Solution 5:
Years 01 2 3 4 5
$400 $1000
FV = $1000
t = 5 years
r = 10%
PV=? at t = 2
PV = FV/ (1 + r)^n
= $1000/ (1 + 0.1)^3
= $1000/ 1.331
PV = $ 751.3
Amount you need to add for reaching target in future is = 751.3 – 400
= $351.3