Problem 4.01 – First City Bank
Essentials of Corporate Finance
Ross, Westerfield, and Jordan
10th Edition and 11th Edition
First City pays simple interest. Second City pays compound interest. Calculate the difference.
First City pays simple interest. Second City pays compound interest. Calculate the difference.
For each of the following, compute the future value.
For each of the following, compute the present value.
Solve for the unknown interest rate in each of the following.
Solve for the unknown number of years given a grid.
What annual interest rate must be earned on an investment of the present amount to cover the future cost of a college education? They give you what the cost of college will be when your kid enters college and ask you for the annual rate of return you must earn in order to pay for it.
How long does it take to double your money? How long does it take to quadruple your money?
Determine the rate of return on historical coin investments based on their purchase and sale prices. Given the value of a Liberty Seated half dollar (or penny) issued a long time ago which sold for a large sum of money, what was the rate of return?
Determine the time required to save enough to purchase a Ferrari by investing at a bank that is paying annual interest. How long will it be before you have enough to buy the car?
Imprudential, Inc. has an obligation to pay a pension liability in the future, and financial analysts want to determine its present value. Calculate the present value of the liability, considering a relevant discount rate. What is the present value of the liability?