Ch 5A Questions

Problem 1: Calculating Future Values. For each of the following, compute the future value:

Present Value ($)

Years

Interest Rate

Future Value($)

3680

5

20%

1a

9740

10

6%

1b

86399

15

10%

1c

565000

20

4%

1d

Problem 2: Calculating Present Values. For each of the following, compute the present value:

Present Value ($)

Years

Interest Rate

Future Value($)

2a

7

4%

999

2b

9

8%

1999

2c

17

16%

11999

2d

23

32%

111999

Problem 3: Calculating Interest Rates For each of the following, solve for the unknown interest rate:

Present Value ($)

Years

Interest Rate(%)

Future Value($)

300

4

3a

400

350

10

3b

900

36000

16

3c

90000

67000

29

3d

2000000

Problem 4: Calculating the Number of Periods.For each of the following, solve for the unknown number of payments:

Present Value ($)

Years

Interest Rate

Future Value($)

640.45

4a

6%

963

872

4b

7%

1603.14

56329

4c

12%

79138.19

112217.97

4d

2%

166750

Problem 5: Calculating the Number of Periods/Present Value.You are trying to save to buy a new $78,000 Volkswagen.You have $10,000 today that can be invested at your bank.

5a.The bank pays 3.75% annual interest on its accounts.How long will it be before you have enough to buy the car?It will be _____years.

5b.Instead of depositing funds in the bank you decide to invest in a mutual fund that you believe will achieve a 7.32% annual rate of return.You want to buy the car in 15 years on the day you turn 35, how much must you invest today?I must invest $_________ today.

Problem 6: Calculating Future Values.You have just made your first $1,000 contribution to your individual retirement account (IRA).Assume you earn a 12% rate of return and make no additional contributions.

6a. When you retire in 32 years, the account will be worth$___________.

6b.If you wait 5 years before making your initial contribution, the account will be worth$___________.

Problem 7: Calculating Future Values.You are scheduled to receive $17,000 in 3 years.When you receive it, you will invest it for nine more years at 6% per year.In twelve years, the account will be worth $____________.

Problem 8: Calculating the Number of Periods.You expect to receive $60,000 at graduation in 2 years. You plan on investing it at 6% until you have $150,000.How long will you have to wait from now? I will have to wait _________years from now.

Problem 9: Calculating PresentValues.You need $40,000 in nine years.If you can earn .22% per month, how much will you have to deposit today?I will have to deposit $___________, today.

Problem 10: Calculating PresentValues.You have decided that you want to be a millionaire when you retire in 32 years.

10a.If you can earn a 8% return, how much do you have to invest today?I have to invest $_________, today

10b.If you can earn an 10% return, how much do you have to invest today? I have to invest $_________, today.