FINANCIAL ACCOUNTING
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Transcribed Image Text:Exercise B-18 (Algo) Practical applications of the time value of money LO P1, P2, P3, P4
Provided are links to the present and future value tables: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from
the tables provided. Round your answer to the nearest whole dollar.)
a. How much would you have to deposit today if you wanted to have $64,000 in three years? Annual interest rate is 10%.
b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 6% on your
investments, how much would you have to deposit today to have $18,000 when you graduate? (Round your answer to 2 decimal
places.)
c-1. Calculate the future value of an investment of $774 for ten years earning an interest of 9%. (Round your answer to 2 decimal
places.)
c-2. Would you rather have $774 now or $1,800 ten years from now?
d. Assume that a college parking sticker today costs $92. If the cost of parking is increasing at the rate of 6% per year, how much will
the college parking sticker cost in seven years? (Round your answer to 2 decimal places.)
e. Assume that the average price of a new home is $132,500. If the cost of a new home is increasing at a rate of 7% per year, how
much will a new home cost in eight years? (Round your answer to 2 decimal places.)
f. An investment will pay you $13,000 in 9 years, and it also will pay you $360 at the end of each of the next 9 years (years 1 through
9). If the annual interest rate is 5%, how much would you be willing to pay today for this type of investment? (Round your intermediate
calculations and final answer to the nearest whole dollar.)
g. A college student is reported in the newspaper as having won $13,500,000 in the Kansas State Lottery. However, as is often the
custom with lotteries, she does not actually receive the entire $13.5 million now. Instead she will receive $675,000 at the end of the
year for each of the next 20 years. If the annual interest rate is 7%, what is the present value (today's amount) that she won? (ignore
taxes). (Round your answer to nearest whole dollar.)
a. Present value
b. Present value
c-1. Future value
c-2. Would you rather have $774 now or $1,800 ten years from now?
d. Future value
e. Future value
f. Present value
g. Present value
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