Concept #1: Time Value of Money Tables: Equations

Concept #2: Time Value of Money Table: Present Value of Lump-Sum

Concept #3: Time Value of Money Table: Present Value of Annuity

Example #1: Using Time Value of Money Tables

Practice: You have won the lottery! You are given two options for your payout:

1. You can receive $540,000 today

2. You can receive $50,000 annually each year for the next twenty years

Assuming the interest rate is 6%, which is the better option?

Concept #4: Time Value of Money Tables: Bonds Payable

Example #2: TVM Tables and Bonds Payable

Practice: ABC Company issues 1,000 bonds with a face value of $1,000 maturing in eight years. The bonds pay 8% interest semi-annually and the current market rate of interest is 12%. What is the total amount of cash received from the bond issuance?

Compute the present value of $5,000 to be received one year from today if the interest rate is 10%, compounded annually.
A) $4,545.50
B) $5,050.00
C) $4,500.00
D) $5,500.00

Your grandmother has agreed to send you $14,000 a year for 4 years to help finance your college education. What is the present value of this annuity at a discount rate of 10%?
A) $34,816.60
B) $56,000.00
C) $55,600.00
D) $44,378.60

I decide I want to retire in 20 years, and plan to invest $6,000 a year. Assuming a 12% interest rate, to solve for how much I will have in my fund to retire with, I need to solve for: $6,000 (PV ann n = 20, I = 12%)
A. True
B. False

Cainas Cookies issues a $20,000, 8%, 10 years bond that pays interest semi-annually. The market rate is 6%. When calculating the issue price of the bond, what are the number of periods and the interest used? (n=?, i=?)

What is the selling price (to the nearest dollar) of 4-year bonds with a par value of $200,000 and an annual coupon rate of 8% that are sold when the market rate of interest is 12%?
A) $180,093
B) $175,697
C) $199,994
D) $200,000