Question
Problem 1: Calculating Future Values. For each of the following, compute the future value: Present Value ($) Years Interest Rate Future Value($) 3680 5 20%
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 Present Values. 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 Present Values. 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.
11. Present Value and Multiple Cash Flows
Investment X offers to pay you $2000 per year for ten years, whereas Investment Y offers to pay you $6,000 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5 per cent? If the discount rate is 25 per cent?
- PV of 2,000 for 10 years at 5% = $______________
- PV of 6,000 for 5 years at 5% = $________________
- PV of 2,000 for 10 years at 25% =$_______________
- PV of 6,000 for 5 years at 25% = $_______________
12. Calculating Annuity Values
You want to have $75,000 in your savings account six years from now, and youre prepared to make equal annual deposits into the account at the end of each year. If the account pays 7.1 per cent interest, what amount must you deposit each year?
$____________________
13. Calculating Annuity Values
Vanzan Bank offers you a $61,000, nine year term loan at 13% annual interest. What will your annual loan payment be?
$_____________________
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