Long Term Obligations and Assets

This homework is designed to improve your facility in working with time value of money. Helpful hints can be seen in exercises and demonstrations .

1. Two pensions are offered. Using time value of money criteria which would be the more economically attractive? Complete the worksheet below and give your answer.

                         plan 1   plan 2
     future amount        50000    65000
     time to wait            11       13
     discount              0.07     0.07
     

2. A government estimates that the total sick leave accrued by the end of a five year period is 750,000. If the government wants to save an equal amount each year, how much should it save if it expects to earn 6% on any investments?
3. Give the present value of $1 for 5 years and 10%; and the future value of an annuity for 5 years and 9%