1. Eddieâ€™s Yachts borrows $200,000 to be paid off in four years. The loan payments are semiannual with the first payment due in six months, and interest is at 6%. What is the amount of each payment?
2. Camsung Manufacturers has signed a contract to purchase equipment. The contract requires Camsung to pay $3,000 at the end of each quarter for the next three years. Because Camsung is a relatively risky company, it would have to pay 10% annual interest if it borrowed the money from a local bank. On the acquisition date, at what amount should the new asset be valued on the balance sheet of Camsung Manufacturerâ€™s?
3. Michael wants to buy a new boat in about fuve years. He can afford to set aside $4,200 at the end of each year for the next 5 years. How much will Michael have at the end of five years if he earn 4% on his savings?
4. Define the present value of a single sum.
5. You decide you want to remodel your bathroom in three years. Based on estimates you have obtained you will need $8,000. How much will you have to deposit in the bank today at 6% interest to get the needed amount?
6. If the same amount is to be received or paid each period, the series of cash flows is referred to as what?
7. What is an ordinary annuity?
8. When do the cash flows to an annuity due begin?
9. If you deposit $10,000 in a savings account and leave it alone what will be the balance in your savings account at the end of eight years at 4% interest?
10. Johnson Products sold merchandise to Pro Inc., on September 30, 2011. Payment was made in the form of a non-interest bearing note requiring Pro to pay $100,000 on september 30, 2013. Assume that a 9% interest rate properly reflects the time value of money in this situation. Calculate the amount at which Johnson should record the note receivable and corresponsing sales revenue on September 30,2011.