Practice Questions on Time Value of Money PV 7. Suppose you deposit $100,000 in an account today that pays 6% interest, compounded annually. How long does it take before the balance in your account is $500,000? F fv( 2 If you deposit S10 in an account that pays 5% interest, compounded annually, how much will you have at the end of 10 years? 50 years? 100 years? How much interest on interest is earned in an account by the end of 5 years if $100,000 is deposited and interest is 4% per year, compounded continuously? Note: Interest on interest is the difference between the future value calculated using compounded interest and the future value calculated using simple interest, because simple interest includes only interest on the principal amount, not the interest-on-interest. How much will be in an account at the end of five years the amount deposited today is S10,000 and interest is 8% per year, compounded semi-annually? O Suppose you want to have $0.5 million saved by the time you reach age 30 and suppose that you are 20 years old today. If you can eam 5% on your funds, how much would you have to invest today to reach your goal? How much would I have to deposit in an account today that pays 12% interest, compounded quarterly, so that I have a balance of $20,000 in the account at the end of 10 years? How long does it take your money to grow to ten times its original value if the interest rate of 5% per year? * Suppose I want to be able to withdraw $5,000 at the end of five years and withdraw $6,000 at the end of six years, leaving a zero balance in the account after the last withdrawal. If I can eam 5% on my balances, how much must I deposit today to satisfy my withdrawals needs? Jo. The Lucky Loan Company will lend you SI0,000 today with terms that require you to pay off the loan in thirty-six monthly installments of $500 cach. What is the effective annual rate of interest that the Lucky Loan Company is charging you? What is the balance in an account at the end of 10 years if S2,500 is deposited today and the account eams 4% interest, compounded annually? quarterly