Economics Homework Help

1.Why does money have a “time value”?

2.There is a saying that “time is money”. What is meant by that? How is this the same – or different – than the idea of the time value of money?

3.Find the future value of $5,000 invested in each of the following situations:
a. 5 percent for 10 years
b. 7 percent for 7 years
c. 9 percent for 4 years

4.What is the present value of $5,000 to be received in each of the following situations:

a. at end of 10 years with a 5% discount rate.
b. at the end of 7 years when the appropriate interest rate is 7%.
c. at the end of 9 years using an interest rate of 9%.

5.What is the return on an investment (ROI) that costs $500 today and will return $800 at the end of 4 years?

6.What long will it take a $100 investment to double to $200 if the interest rate is 6%?

7.What is the present value (PV) of a loan that calls for the payment of $500 per year for six years if the discount rate is 10 percent and the first payment will be made one year from now? How would your answer change if the $500 per year occurred for ten years?

8.You are considering borrowing $150,000 to purchase a new home. Calculate the monthly payment needed to amortize an 8 percent fixed-rate 30-year mortgage loan.