Question
HW 2 is due Sunday 10/1/23 by 11:59 p.m. Show your work! (If you show only the answers, youll only get 50% of the available
HW 2 is due Sunday 10/1/23 by 11:59 p.m.
Show your work!
(If you show only the answers, youll only get 50% of the available points)
1. What APR is being earned on a deposit of $5,000 made 10 years ago today if the deposit is worth $9,848.21 today? The deposit pays interest semiannually.
2. Would a depositor prefer an APR of 8% with monthly compounding or an APR of 8.5% with semiannual compounding?
3. What is the annually compounded rate of interest on an account with an APR of 10% and monthly compounding?
4. Assume the total expense for your current year in college equals $20,000. How much would your parents have needed to invest 21 years ago in an account paying 8% compounded annually to cover this amount?
5. What will be the approximate population of the United States, if its current population of 300 million grows at a compound rate of 2% annually for 25 years?
6. The present value of $1,000 to be received in 5 years is ________ if the discount rate is 7.8%.
7. You decide you want your child to be a millionaire. You have a son today and you deposit $15,000 in an investment account that earns 9% per year. The money in the account will be distributed to your son whenever the total reaches $1,000,000. How old will your son be when he gets the money (rounded to the nearest year)?
8. What is the present value of $15,500 to be received 12 years from today? Assume a discount rate of 7.5% compounded annually and (round to the nearest $1)?
9. How much money do I need to place into a bank account that pays a 6% rate in order to have $500 at the end of 7 years?
10. You have a fixed settlement due to pay you $500,000 in 6 years. Because you need cash today, you have opted to try to sell the settlement to a company specializing in such matters. The company offers to pay you $350,000 today. If your discount rate is 5% what would be the equivalent future value of the offer?
11. What is the future value of $4,900 invested for 8 years at 7 percent compounded annually?
12. Travis invests $10,000 today into a retirement account. He expects to earn 8 percent, compounded annually, on his money for the next 26 years. After that, he wants to be more conservative, so only expects to earn 5 percent, compounded annually. How much money will he have in his account when he retires 38 years from now, assuming this is the only deposit he makes into the account?
13. Six years from now, you will be inheriting $100,000. What is this inheritance worth to you today if you can earn 6.5 percent interest, compounded annually?
14. You want to purchase a new condominium which costs $329,000. Your plan is to pay 20 percent down in cash and finance the balance over 25 years at 6.25 percent. What will be your monthly mortgage payment?
15. Jodie's Fashions has just signed a $2.2 million contract. The contract calls for a payment of $0.6 million today, $0.8 million one year from today, and $0.8 million two years from today. What is this contract worth today if the firm can earn 7.2 percent on its money?
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