Ex1. You put $1,000 into a savings account that pays 12% interest and compounds quarterly. You want to figure out how much money youll have in 3 years if you leave the money sitting there.

Ex2. You will receive $3,000 three years from now. This investment should earn 12% compounded annually. What is this worth now?

Ex3. Someone offers to pay you $5,000 two years from now if youll let him/her borrow $4,300 right now. What is the annual interest rate earned?

Ex4. You are investing in a project that is expected to pay $10,000 in one year and $20,000 two years from now. Assume you want to earn a 6% annual rate of interest or return. What would you be willing to invest in the project? Check figure: 27,234.

Ex5a. You are investing in a project that is expected to pay $20,000 in one year and $20,000 two years from now. Assume you want to earn a 6% annual rate of interest or return. What would you be willing to invest in the project?Ex5b. Now lets make this a 2 year annuity due.

Ex6. We want to issue a $200,000 five-yr bond with a stated interest rate of 10% with interest paid at year end. Assume that the usual interest rate for similar bonds is only 8%. How much should someone pay for this bond?

For one-time payments, you should be able to solve for 1) the PV, 2) the FV, 3) the interest rate, or 4) the number of time periods as long as the other three items are given. For annuities, you should be able to solve for 1) the PV or FV, 2) the annuity amount, 3) the interest rate, or 4) the number of time periods as long as the other three items are given.