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Pharmacoeconomics and Health Outcomes

Group Exercise 2: Cover Sheet


Honor Code
Last Name, First Name (PRINTED!) Signature
(i.e. “Submitted with honor”)

1.

2.

3.

4.
Pharmacoeconomics and Health Outcomes
Discounting
Please write ALL your final answers in this table, it will be easier to grade. Thanks!

Question
Write answers here
Number:

1.
2.

3.

4.

5.

1. How much would an investor have to set aside today in order to have $120,000 five
years from now if the current interest rate is 8%? (this is a present value)

NOW 2/26/2009 2/26/2010 2/26/2011 2/26/2012 2/26/2013


?????? $ 120,000
2. Grandma invested your next year’s tuition in a safe mutual fund earning 7% annually.
How much will she be able to give you in two (2) years? (this is a future value).

NOW 2/26/2009 2/26/2010


$25,000 ??????

3. You own a Cosler Savings Bond – guaranteed to pay you $10,000 for the next 5
years. Assuming you could earn 7% on your money, how much would you be willing
to sell your Savings Bond for – TODAY? (this is the present value of an annuity or
several cash payments)

NOW 2/26/2009 2/26/2010 2/26/2011 2/26/2012 2/26/2013


?????? $ 10,000 $10,000 $10,000 $10,000 $10,000
4. If you deposit $6,000 today in an account paying 10%, how long does it take to grow to
$12,000? (hint: use the future value single payment equation )

NOW ??????
$ 6,000 $ 12,000

5. You want to begin saving for your child’s tuition to the Albany College of Pharmacy.
Assume your child will start college in 20 years. (Prof. DeNuzzo will still be
teaching…) By then, you will need $220,000 to put him or her through ACP. You
have $8,000 to invest right now (assume you never add to this initial investment).

What annual interest rate will you have to earn to accomplish this?
(hint: use the future value single payment equation)