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-   -   Bonds and time value of money (https://www.askmehelpdesk.com/showthread.php?t=158013)

  • Dec 1, 2007, 09:41 AM
    nav3
    Bonds and time value of money
    I have a few questions that seem easy but I want to make sure I know what I'm doing

    1) If you invest 40000 today and 8%, how much would you have at the end of 5 years, if compounded semi-annually?

    2) If you invest 5000 per year for 8 years earning 8% per year how much would you have at the end of 8 years?

    3) If you are offerd 50000 in 3 years and you require 4% on similar investments, what would you be willing to pay today if semiannual?

    4) If you are offered 12000 per year for 5 years and you require 9%, how much would you be willing to pay today?
  • Dec 1, 2007, 03:33 PM
    terryg752
    I am not sure but I think it will be like this:

    1. 40000 times (1+.04)^10

    2. 5000 (1+.08)^8 + 5000 (1+.08)^7 + 5000 (1+.08)^6... 8 terms

    = 5000 (1.08^8 + 1.08^7 +... )

    = 5000 (1.08^8 - 1) / (1.08 -1)

    3. 100 becomes in 3 years = 100(1.04)^6

    If 100(1.04)^6, Pay now = 100

    If 1, Pay now = 1/1.04^6

    If 50000, Pay now = 50000/1.04^6


    Similarly for other questions

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