Annual Time Value of Money

1. A zero-coupon bond is a security that pays no interest, and is therefore bought at a substantial discount from its face value. If the interest rate is 11% with annual compounding how much would you pay today for a zero-coupon bond with a face value of $2,600 that matures in 7 years?

Please round your answer to the nearest cent.

2. A financial institution offers a "double-your-money" savings account in which you will have $2 in 8 years for every dollar you invest today. What annual interest rate does this account offer?

Please specify your answer in decimal terms and round your answer to the nearest thousandth (e.g., enter 12.3 percent as 0.123).

3. You have $50,000 in savings for retirement in an investment earning 7% annually. You aspire to have $1,000,000 in savings when you retire. Assuming you add no more to your savings, how many years will it take to reach your goal?

Please round your answer to the nearest hundredth.

Note that the HP 12c financial calculator rounds up the periods result to the next integer and will not give the correct answer to the nearest hundredth. Therefore, you should use Excel or a financial calculator that does provide decimal precision to the number of periods.

4.You have $1,200 in savings for retirement. If your investments earn 9% annually, how much will you have in your retirement account in 4 years?

Please round your answer to the nearest cent.