Question
1. You plan to deposit $700 in a bank account now and $100 at the end of the year. If the account earns 5%interest per
1. You plan to deposit $700 in a bank account now and $100 at the end of the year. If the account earns 5%interest per year, what will be the balance in the account right after you make the second deposit?
2. You have just received a windfall from an investment you made in a friends business. She will be paying you $10,000 at the end of this year, $20,000 at the end of next year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year. What is the present value of your windfall? Round to the nearest whole dollar.
3. You have just received a windfall from an investment you made in a friends business. She will be paying you $10,000 at the end of this year, $20,000 at the end of next year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year. What is the future value of your windfall in three years (on the date of the last payment)? Round to the nearest whole dollar.
4. Suppose you receive $100 at the end of each year for the next three years.
What is the future value in three years at 8% interest?
5. Assume you can earn 9% per year on your investments.
If you invest $100,000 for retirement at age 30, how much will you have 35 years later for retirement?
6. Considering the previous question, if you wait until age 40 to invest the $100,000, how much will you have 25 years later for retirement?
7. You want to endow a scholarship that will pay $10,000 per year forever, starting one year from now. If the schools endowment discount rate is 4%, what amount must you donate to endow the scholarship?
8. You have $100,000 to donate to your college. You want to endow a perpetual scholarship that makes its first payment in 1 year. If the colleges discount rate is 5%, how large will the annual scholarship payment be?
9. If you still donate the $100,000 from the previous problem (investment made today), but ask the college to delay the scholarship payment so that the first scholarship payment is made 10 years from today, then how large will the annual payment be? Recall that the interest rate is 5%.
Round to the nearest whole dollar.
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