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1. Brad is interested in how many years it would take for his $1,500 deposit earning 6% interest per year compounded annually to double in
1. Brad is interested in how many years it would take for his $1,500 deposit earning 6% interest per year compounded annually to double in value. 2. Susan decides to deposit $40,000 into a bank that offers 4.75% annual interest which is then converted to a monthly compounding. After six years, what will Susan's account total? 3. Two years ago, Joe started investing $1,250 per year in an account earning 8% interest compounded annually. He planned on making a total of five deposits. Calculate how much money Joe will have with the fifth and last deposit. 4. Jody is planning to buy a car for $20,000, putting 20% down in cash, with the rest going towards a loan. The bank tells her that the interest rate on the loan will be 8% per year, which is then compounded monthly, for a three-year loan. What is Jody's monthly payment going to be? 5. An insurance policy promises to pay you and your heirs $2,500 per year forever, should you become ill. How much would you pay for this policy today if the cost of capital (or rate of return) is 6% and you are factoring 2% growth? 6. *Mary estimated that she will have $300,000 in her savings account when she retires in 2030. Suppose that Mary has estimated that she would need $25,000 per year to live comfortably during her retirement. How long can Mary expect to make withdrawals during retirement before she will have depleted her account if she is earning 5% annually? 7. You decide to start investing in a savings account that earns 5% per year. One year from now, you plan on depositing $3,000 into the account, with the expectation that these deposits will grow by 2% each year for four years. What is the present value of this stream of cash flows? How much will you have at the end of the deposit time period
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