Time Value of Money Quiz 1 ( Reading 6, CFA Level I)

A successful business man wants to provide scholarships for the education of intelligent but needy children. He plans to setup a fund that will be used to give out donations worth $20,000 every year in perpetuity. He will start giving these scholarships 5 years from now. He plans to deposit a lump sum today that will grow at a rate of 10% compounded semi-annually. How much lump sum should he deposit today to be able to meet the requirements of the perpetuity?

An investor deposits a sum of $5,000 in a savings scheme that provides an interest of 7% compounded monthly. How much will his investment grow to in 5 years?

An investor made an investment of $10,000 in a fixed deposit. After 5 years, he received an amount of $15,000. Assuming semi-annual compounding, what is the effective annual rate earned on the investment?

An investor wants to have saved $10,000 in a period of 3 years. How much should he invest today to reach his target in 5 years when his investment account earns 9% per annum?

Ken Atkins had taken a 30-year mortgage of $100,000 for his home 5 years back. The interest rate on the mortgage is a fixed rate of 12% per annum. He has been paying equated monthly payments on the loan. What will be the current loan balance?