Finance 311

1. Problem 5.01 (Future Value)

If you deposit $10,000 in a bank account that pays 12% interest annually, how much will be in your account after 5 years? Do not round intermediate calculations. Round your answer to the nearest cent.

2. Problem 5.02 (Present Value)

What is the present value of a security that will pay $21,000 in 20 years if securities of equal risk pay 12% annually? Do not round intermediate calculations. Round your answer to the nearest cent.

3. Problem 5.03 (Finding the Required Interest Rate)

Your parents will retire in 27 years. They currently have $230,000 saved, and they think they will need $850,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? Round your answer to two decimal places.

4. Problem 5.04 (Time for a Lump Sum to Double)

If you deposit money today in an account that pays 13.5% annual interest, how long will it take to double your money? Round your answer to two decimal places.

? years

5. Problem 5.05 (Time to Reach a Financial Goal)

You have $39,346.68 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $260,000. You expect to earn 13% annually on the account. How many years will it take to reach your goal? Round your answer to the nearest whole number.

? years

6. Problem 5.06 (Future Value: Annuity Versus Annuity Due)

What's the future value of a 3%, 5-year ordinary annuity that pays $100 each year? If this was an annuity due, what would its future value be? Do not round intermediate calculations. Round your answers to the nearest cent.

Future Value of an Ordinary Annuity: $

Future Value of an Annuity Due: $

7. Problem 5.07 (Present and Future Values of a Cash Flow Stream)

An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $300 at the end of Year 5, and $600 at the end of Year 6. If other investments of equal risk earn 8% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $

Future value: $

8. Problem 5.08 (Loan Amortization and EAR)

You want to buy a car, and a local bank will lend you $10,000. The loan will be fully amortized over 5 years (60 months), and the nominal interest rate will be 12% with interest paid monthly. What will be the monthly loan payment? What will be the loan's EAR? Do not round intermediate calculations. Round your answer for the monthly loan payment to the nearest cent and for EAR to two decimal places.

Monthly loan payment: $

EAR: %

9. Problem 5.11 (Growth Rates)

Sawyer Corporation's 2018 sales were $9 million. Its 2013 sales were $4.5 million.

a. At what rate have sales been growing? Round your answer to two decimal places.

b. Suppose someone made this statement: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year." Is the statement correct?

10. Problem 5.12 (Effective Rate of Interest)

Find the interest rates earned on each of the following. Round your answers to the nearest whole number.

1. You borrow $700 and promise to pay back $749 at the end of 1 year.

   %

2. You lend $700 and the borrower promises to pay you $749 at the end of 1 year.

   %

3. You borrow $55,000 and promise to pay back $232,443 at the end of 11 years.

   %

4. You borrow $10,000 and promise to make payments of $2,504.60 at the end of each year for 5 years.

   %

11. Problem 5.13 (Time for a Lump Sum to Double)

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How long will it take $200 to double if it earns the following rates? Compounding occurs once a year. Round your answers to two decimal places.

1. 7%.

   year(s)

2. 11%.

   year(s)

3. 19%.

   year(s)

4. 100%.

   year(s)

12. Problem 5.16 (Present Value of a Perpetuity)

What is the present value of a $200 perpetuity if the interest rate is 6%? If interest rates doubled to 12%, what would its present value be? Round your answers to the nearest cent.

Present value at 6%: $

Present value at 12%: $

13. Problem 5.18 (Uneven Cash Flow Stream)

1. Find the present values of the following cash flow streams at a 9% discount rate. Do not round intermediate calculations. Round your answers to the nearest cent.

   0

   1

   2

   3

   4

   5

   Stream A	$0	$100	$400	$400	$400	$300
   Stream B	$0	$300	$400	$400	$400	$100

   Stream A: $

   Stream B: $

2. What are the PVs of the streams at a 0% discount rate? Round your answers to the nearest dollar.

   Stream A: $

   Stream B: $

-Select- The statement is correct because 100% divided by 5 equals 20%. The statement is incorrect because there are 6 years of sales growth between 2013 and 2018. The statement is incorrect because a company's sales cannot double in such a short time span. The statement is incorrect since the effect of compounding is not considered. The statement is correct since the effect of discounting is considered