1 Compound Interest Calculated Manually how it works Calculate the interest and maturity due at the end of each of the war compounding the interest yearly. The engingin $131.000 and the rulerstrate is 11 Show your work your answer should be equal to 181.19. Show your work Beging of the Times the in terest Ending Page 2 the what we duty theo r y the Times the Future Being of the Value Factor for year instant years at 11 Ending we insurance agents package surrender vale long with finance and call it Whole Ufe is very deceptive You are told that putting st 100 per month away for 25 years, your surrender value wil be 550.000 Sounds good. In fact, you will have contributed only 500.000 1100 125. Svou think t to be true. But understanding te val of money you want to look doser Socculate th e deal without the insurance premium but wandel me what your nestent would be at this ways. Consider that we put in $100 12 times a year or $1.200 can cam on the over time, what will be worth? Do the same math but do instead. Do the same math for over 30 years, 25 846 for 25 for 30 ding the presente tables for Bump sumnst the annutyl save the following turn on investment analye. A department head wants to buy a $100.000 machine that will cost saving the company a lot of money. When pushed the department has made the following conson savings positive cash flow You have other investment opportunities, so you only prove this request Fitrums at least 1 tum investment IRON Presentate r Presente atow End of year one cash savings End of year w ash Savings End of year the chang End of y our Ne e totalings 18.000 ds future years o in the present w as been discounted back t vestment, then it is returning a higher than 12NROE has now than 1 greater than $100.000 is less than 100.000, then 1 Compound Interest Calculated Manually - how it works Calculate the interest and maturity due at the end of each of three years compounding the interest yearly. The original principal is $133,000 and the annual interest rate is 11%. Show your work. Your answer should be equal to 181,895. Show your work. Beginning of the year investment Times the Annual interest Rate Annual Interest earned that year Ending Principal and Interest yr 1 *** note that ending balance is next years beginning investment yr 2 yr 3 2 Using the tables, what would the amount due at maturity of the above problem after 5 years. Use the table, not your Hewlert-Packard. Times the Future Beginning of the Value Factor for 5 year investment years at 11% Blank Ending Value 3 Insurance agents package a surrender value along with life insurance and call it "Whole Life." It is very deceptive. You are told that putting just $100 per month away for 25 years, your surrender value will be $50,00011 Sounds good. In fact, you will have contributed only $30,000 (100*12*25). So, you think this is too good to be true. But, understanding time valu of money you want to look closer. So, calculate this same deal without the insurance premium built in and tell me what your investment would be. Calculate this 3 ways. Consider that we put in $100 12 times a year or $1,200. If we can earn 6% on this over time, what will it be worth? . Do the same math but do 8% instead. Do the same math for 8% over 30 years. 6% for 25 896 for 25 8% for 30 4 Using the present value tables for a lump sum (not the annuity), solve the following Return on investment analysis. A department head wants to buy a $100,000 machine that will cut costs saving the company a lot of money. When pushed, the department head made the following predictions on savings (positive cash flow). You have other investment opportunities, so you will only approve this request if it returns at least 12% return on investment (ROI). Present value factor 12% Present Value of cash flow End of year one cash savings End of year two cash savings End of year three cash savings End of year Four cash savings No additional savings anticipated in future years. total savings 45,000 28,000 25,000 18,000 116,000 Hint: the present value has been discounted back at 12%, so if it is greater than $100,000 investment, then it is returning a higher than 12% ROI. If it is less than $100,000, then it has an ROI less than 12%