Chapter Review and Self Test Problems

5.1 Calculating Future Values Assume you deposit $10,000 today in an account that pays 6 percent interest. How much will you have in five years?

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

III. Valuation of Future Cash Flows

5. Introduction to Valuation: The Time Value of Money

© The McGraw-Hill Companies, 2002

CHAPTER 5 Introduction to Valuation: The Time Value of Money

5.2 Calculating Present Values Suppose you have just celebrated your 19th birthday. A rich uncle has set up a trust fund for you that will pay you $150,000 when you turn 30. If the relevant discount rate is 9 percent, how much is this fund worth today?

5.3 Calculating Rates of Return You've been offered an investment that will double your money in 10 years. What rate of return are you being offered? Check your answer using the Rule of 72.

5.4 Calculating the Number of Periods You've been offered an investment that will pay you 9 percent per year. If you invest $15,000, how long until you have $30,000? How long until you have $45,000?

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