(solutions must be in an Excel file)

q1) Simple Interest versus Compound Interest First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made a $5,000 deposit in each bank: how much more money would you earn from your Second City Bank account at the end of 10 years?

2)Calculating Interest Rates Assume the total cost of a college education will be $290,000 when your child enters college in 18 years. You presently have $55,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?

3)Calculating Present Values Imprudential, Inc. has an unfunded pension liability of $650 million that must be paid in 20 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 7.4 percent, what is the present value of this liability?

4)Calculating Future Values Your coin collection contains fifty 1952 silver dollars. If your grandparents purchased them for their face value when they were new, how much will your collection be worth when you retire in 2057, assuming they appreciate at a 4.5 percent annual rate?

5)Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby's sold the Edgar Degas bronze sculpture Petite Danseuse de Quatorze Ans at auction for a price of $10,311,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,377,500. What was his annual rate of return on this sculpture?

6)You have just made your first $4,000 contribution to your retirement account. Assuming you earn an 11 percent rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing? (Does this suggest an investment strategy?)

7)