1. You are promised $3,000 that you will receive 4 years from now.What is that payment promise worth today, if the interest rate is 6%?

2. Your grandmother offers you a deal, she will give you $1,000/year for the next 4 years OR she will give you $3,400 today. If your investments are earning 8%, which is the better deal?

3. You are evaluating a project that will generate $10,000 in additional annual revenue for the next 5 years. If the interest rate is 10%, how much are those revenues worth in today's dollars?

4. You win the lottery, you can take $1 million today or $80,000/year for the next 25 years. If you can make a 6% annual return, which is the better deal?

5. You borrow $100,000 from the bank at an annual interest rate of 7.5%. The term of the loan is for 10 years. How much will your annual payment be?

How much interest will you pay on this loan, if you make all of the annual payments

What happens to the amount of interest you pay when you increase the interest rate?

What happens to the amount of interest you pay when you increase the term of the loan?

6. You go to buy your dream car, it costs $35,000. If you have enough for a 20% downpayment and need to borrow the rest on a 5-year loan at an APR of 6%, how much will the MONTHLY payment be?

7. After you graduate from EC you land a job for $48,000/year or $4,000/month (before tax income). You determine that you can afford a monthly car payment of $450. If you borrow $$ for 48 months at 5.75% APR and have $2,000 saved for a down payment (a graduation gift), how much can you afford to pay for your new car?

What if you borrow for 60 months instead?

What's the bad news?

If you borrow for 60 months - how much interest do you pay?

If you borrow for 48 months - how much interest do you pay?

-

1. The 5-year interest rate is 5.00%.

a. If you deposit $100 today with annual compounding, how much will your investment be worth at the end of five years?

b. Allocate the future value between

Original Deposit
Simple Interest
Interest-on-Interest (Compound Interest)
Total

2. You borrow $500,000 from a bank on a 30-year loan with a 5.5% annual interest rate.

(a) How much will the monthly payment be?

(b) What % of your total payments will go towards interest and what % of your total payments will pay off the principal?

3. Citizens Bank is offering Lesley University business majors a 'special' savings plan whereby they deposit $1,000 today and in two years receive $1,200.All other clients receive 8% per year on deposits. Is this 'special' offer a good deal?

4. You borrow $200,000 to finance a corporate expansion. The interest rate is 6% and the loan has a 5-year term.How much will the annual payment be?If you make all the payments how much will you pay in interest on the loan?