For your job as the business reporter for a local? newspaper,you are given the task of putting together a series of articlesthat explain the power of the time value of money to your readers.Your editor would like you to address several specific questions inaddition to demonstrating for the readership the use of time valueof money techniques by applying them to several problems. Whatwould be your response to the following memorandum from your?editor?

?To: Business Reporter

?From: Perry? White, Editor, Daily Planet

?Re: Upcoming Series on the Importance and Power of the TimeValue of Money

In your upcoming series on the time value of? money, I wouldlike to make sure you cover several specific points. In? addition,before you begin this? assignment, I want to make sure we are allreading from the same? script, as accuracy has always been thecornerstone of the Daily

Planet.

In this? regard, I'd like a response to the following questionsbefore we? proceed:

a.??What is the relationship between discounting and?compounding?

b.??What is the relationship between the? present-value factorand the annuity? present-value factor?

c. 1. What will $6,700 invested for 26 years at 6 percentcompounded annually grow to?

2. How many years will it take $370 to grow to $2,687.44 if itis invested at 11 percent compounded annually?

3. At what rate would $1,800 have to be invested to grow to$16,243.68 in 18 years?

d. Calculate the future sum of 1,200?, given that it will beheld in the bank for 15 years and earn 17 percent compoundedsemiannually.

e. What is an annuity? due? How does this differ from anordinary? annuity?

f. What is the present value of an ordinary annuity of $2,600per year for 18 years discounted back to the present at 6 percent?What would be the present value if it were an annuity? due?

g. What is the future value of an ordinary annuity of $2,600 peryear for 18 years compounded at 6 percent? what would be the futurevalue if it were an annuity? due?

h. You have just borrowed $150,000, and you agree to pay it backover the next 30 years in 30 equal end-of-year payments plus 14%compound interest on the unpaid balance. What will be the size ofthese payments?

i. ?What is the present value of a perpetuity of $1,600 per yeardiscounted back to the present at 18%?

j. ?What is the present value of an annuity of $1,900 per yearfor 10 years, with the first payment occuring at the end of year 10(that is, ten $1,900 payments occurring at the end of year 10through year 19), given a discount rate of 16%?

k. Given a discount rate of 9%, what is the percent value of aperpetuity of $1,800 per year if the first payment does not beginuntil the end of year? 10?

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