Question
1. Elaine has just received an insurance settlement of $25,000. She wants to save this money until her daughter goes to college 4 years from
1. Elaine has just received an insurance settlement of $25,000. She wants to save this money until her daughter goes to college 4 years from now. If she can earn an average of 6.5 percent, compounded annually, how much interest on interest will she have earned by the time her daughter starts college? Assume she makes no further deposits or withdrawals.
2. You are scheduled to receive $7,500 in three years. When you receive it, you will invest it for eight more years at 7.5 percent per year. How much will you have in eleven years?
3. Berkley Trucking recently purchased a new truck costing $147,800. The firm financed this purchase at 7.6 percent interest with monthly payments of $2,100. How many years will it take the firm to pay off this debt?
4. A loan that compounds interest monthly has an EAR of 14.40 percent. What is the APR?
5. At the end of this month, Les will start saving $150 a month for retirement through his company's retirement plan. His employer will contribute an additional $0.50 for every $1.00 that he saves. If he is employed by this firm for 30 more years and earns an average of 10.5 percent on his retirement savings, how much will Les have in his retirement account 30 years from now?
6. Jack B. Stalk wants to donate an endowed scholarship for a Webster University student. This scholarship will involve a cash flow of $10,000 per year, forever. If Jack thinks the appropriate rate of interest is 5.75%, how much must he invest today to cover this scholarship?
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