Show the inputs you use for each problem. If you don't use a financial calculator, show the formulas that you use. Don't just give the final answer. Correct answers without showing calculation will receive only a small portion of the full credit. Drawing a timeline will be helpful. For example: if the question asks you what is the present value of $200 that you will receive 5 years later with an annual interest rate of 10%? You can draw a time line like this timeline is optional, not required): 0 i=10% N-5 ? 200 And your inputs will be N= 5; I/YR = 10; PMT= 0; FV = 200; Solve for PV =-124.1843 Part 1 1. Victoria would like to make a single investment and have $1 million at the time of her retirement in 30 years. She has found a mutual fund that will earn 3.9 percent annually. How much will Victoria have to invest today? What if Victoria learned how to earn a 9.5 percent annual return, how much would she have to invest today? (3 points) 2. Terry and Betty are in the market for a vacation place. They find a small but pleasant condo in Malibu listed at $867,000. They decide that now is not the right time to buy and that they will wait six years. The condos in Malibu appreciated each year at 3.2%, and Terry and Betty want to know what a similar condo will sell for in five years. Please help them and find it out. (3 points) 3. You are offered $5,000 today, $10,000 in 12 years, or $25,000 in 25 years. Assuming that you can earn 5 percent on your money, which should you choose? (4 points) (hint: you can compare either the PV or FV of each choices) 4. You lend a friend $5,000, for which your friend will repay you $5,780 at the end of 3 years. What interest rate are you charging your friend? (3 points) 5. You are the planning commissioner for Boomtown, a growing city in the Northeast. The city council has estimated that the city's population will increase very rapidly over the next ten years, reaching an estimated 796,000. Today, the population is 612,000. What is the project growth rate of this city? (3 points) 6. Peter asked Rose to marry him, and she has accepted under one condition. Peter must buy a $450,000 house. Peter currently has $378,000 that he may invest. He has found a mutual fund that pays 6% annual interest in which he will place the money. How long will it take Peter to marry Rose? (3 points) 7. Find the future value of the following. Which of the following will result in a future value a of greater than $200? (3 points) a. PV = $100,r= annual interest rate of 9%, and n=9 years b. PV = $125, r = annual interest rate of 11%, and n= 5 years c. PV = $150, r= annual interest rate of 18%, and n = 1 year 8. Approximately how long will it take to double your money if you get i) 3.6% or ii) 9.5% annual return on your investment? What are the exact answers using a financial calculator to solve it? (4 points) 9. Kevin, age 21, wants to be able to buy a really cool new car when he turns 25. His really cool car costs $32,000 today, and its cost is expected to increase 1.85 percent annually. Kevin wants to make one deposit today into an account paying 5.7 percent annually in order to buy his car in 4 year. a) How much will Kevin's car cost? and b) how much 4 does Kevin have to save today in order to buy this car at age 25? (4 points)
