1. Steve recently graduated with his Master’s degree, and landed a great job. He decided that he wants to begin investing and he has asked you for advice. He wants to know that if he invests 2,000 today and leaves it invested for 12 years at a rate of 6% compounded annually, plus he invests 150 per month at the beginning of each month with the same rate of return and compounding frequency, how much will his investment be worth at the end of 12 years?

2. Given the same information in question #1, how much will Steve earn in interest over the 12 year period?

3. Becky wants to have $1,000,000 when she retires. If she deposits $75,000 in the bank today and earns 8% compounded annually, how many years will it take her to reach her investment goals?

4. Given the same information in #3, but Becky has learned about a new investment that will earn her 12% compounded annually instead of 8%. How many years will it take her to reach her investment goals?

5. Payday loans are very short-term loans that charge very high interest rates. You can borrow $500 today and repay $535 in two weeks. What is the compound annual rate implied by this percent rate charged for only two weeks?

6. Given the same information in #5, what is the compound annual interest rate implied if the loan fee (interest) is $50? What is the compound annual interest rate implied.

7. Mr. Jones decides to purchase a used car for $25,000. Mr. Jones has a good credit rating, so the dealer offers to finance the car at 6% interest over a 5 year period. What is the monthly payment amount that Mr. Jones would be expected to pay?

8. Given the same information in #7, Mr Jones decides that 5 years is really to long to finance a used car. What payment would he be expected to pay if he finances the car for 4 years instead of 5?

9. Given the same information in question #8, how much will Mr. Jones still owe on his car at the end of 3 years, assuming he makes all payments on time?

10. Mr. Webster is planning to retire in 30 years, and his goal is to have $1,000,000 in his retirement fund when he retires. He will start by depositing $25,000 into his fund today and $1,000 at the end of each month for the 30 year period. What is the annual rate of return that Mr. Webster will need to accomplish his goal?

11. A loan is offered with monthly payments and 13 percent APR. What is the loan's effective annual rate (EAR)?

12. Mr. Patrick wants to buy a car for $20,000. The bank will provide terms of 4 years at 6%. Mr. Patrick can afford a payment of up to $500 per month. Based on these terms, can Mr. Patrick afford to make the payments? Explain your answer.

13. Mr Jones has a goal to reach 1,500,000 in his retirement account in 30 years. He currently has $25,000 in his account. He expects to earn 6% compounded annually in his investments. How much more money must Mr Jones deposit in his account at the end of each month in order to reach his goals?

14. Tammy realizes that she has charged too much on her credit card and has racked up $30,000 in debt. If Tammy can pay $600 each month and the card charges 23 percent APR (compounded monthly), how long will it take her to pay off the debt?

15. Given the same information in question #14, how much interest will Tammy pay if she chooses to continue in making monthly payments of $600?