文档介绍：: .
payments for his two children, a
father will make a $75,000 payment five years from now. How much will he
need to invest today to meet his first tuition goal if the investment earns 6 per-
cent annually?
5 A client can choose between receiving 10 annual $100,000 retirement pay-
ments, starting one year from today, or receiving a lump sum today. Knowing
that he can invest at a rate of 5 percent annually, he has decided to take the
lump sum. What lump sum today will be equivalent to the future annual
payments?
6 You are considering investing in two different instruments. The first instrument
will pay nothing for three years, but then it will pay $20,000 per year for four
years. The second instrument will pay $20,000 for three years and $30,000 in
the fourth year. All payments are made at year-end.­ If your required rate of
return on these investments is 8 percent annually, what should you be willing to
pay for:
A The first instrument?
B The second instrument (use the formula for a four-­year annuity)?
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352 Reading 6 ■ The Time Value of Money
7 upposeS you plan to send your daughter to college in three years. You expect
her to earn two-­thirds of her tuition payment in scholarship money, so you
estimate that your payments will be $10,000 a year for four years. To estimate
whether you have set aside enough money, you ignore possible inflation in
tuition payments and assume that you can earn 8 percent annually on your