Time Value of Money and Setting Aside Money for buying new Equipment


1. You just won the lottery! As your prize you will receive $1,200 a month for 100 months. If you can earn 8% on your money, what is this prize worth to you today?

a.    $87,003.69
b.    $87,380.23
c.    $87,962.77
d.    $88,104.26
e.    $90,723.76

2. Your firm wants to save $250,000 to buy some new equipment three years from now. The plan is to set aside an equal amount of money on the first day of each year starting today. The firm can earn a 4.7% rate of return. How much does the firm have to save each year to achieve its goal?

a.    $75,966.14
b.    $76,896.16
c.    $78,004.67
d.    $81.414.14
e.    $83,333.33


These multiple choice questions belong to Finance. The first and the second questions are about time value of money where a scenario of lottery winning is given for the first question and in the second question a firm wants to set aside a certain amount of money every year to buy new equipment.


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