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7. Suppose a distant ancestor of yours had invested $1000 in a diversified mon stock portfolio in 1802. Assuming the portfolio remained untouched, how large would that portfolio be at the end of 1997? t = 195 years, r = %, and FVIF(,195) = 6,771, So the value of the portfolio would be: $6,771,892,! Fall 2021 COMM 203 11 Example ? Suppose you need $20,000 in three years to pay your college tuition. If you can earn 8% on your money, how much do you need to invest today? Hint: FV = $20,000, r = 8%, and T= 3. What is the unknown present amount (., the present value)? Fall 2021 COMM 203 12 Example ? Want to be a millionaire? No problem! Suppose you are currently 21 years old, and can earn 10 percent on your money. How much must you invest today in order to accumulate $1 million by the time you reach age 65? Hint: FV = $1 million, r = 10% T = 65 21 = 44 years PV = ? Fall 2021 COMM 203 13 One More Example Your employer normally deposits a paycheck of $2,000 at the beginning of each month. Due to current financial distress, the employer will postpone your current check for two months. 1) How much should he deposit in your account if the market interest rate is 1% per month (excluding the regular check in two months)? $2, 000 * ()2 = $2, Fall 2021 COMM 203 14 One More Example (cont’d) 2) What if the market interest rate is 2%? $2,000 * ()2 = $2, 3) At the end of this month, the employer finds a way to pay you immediately, how much s