TIME VALUE OF MONEY

1. $_________. You plan to start your own business in 6 years, once you graduate from college and get situated. You plan save $1,250 every quarter for the next 6 years. The market rate you can earn is 8%; how much will your investment accumulate to when you are ready to start your business? (Round to nearest dollar)

2. $_________. Your favorite aunt has committed to provide you with $30,000 for a down payment for your first home. You mentioned to her you plan to buy a home in 8 years. She agrees to set aside money for you so that you will have the money in time to purchase your first home. The market rate she can earn over the investment period is 7% and it will compound monthly; how much must she set aside today? (Round to nearest dollar)

3. $__________. You won the lottery when the jackpot was $2,700,000. Your choice is to take the annual payments for 30 years or take the lump sum today. The lottery administrations discount rate is 3.2%. What is the pretax value of the lump sum? (Round to nearest dollar)

4. $_____________You would like to start saving for retirement. Assuming you are now 22 years old and you want to retire at age 60, you have 38 years to watch your investment grow. You decide to invest in the stock market, which you expect it to earn about 6% per year into the future. You decide to invest $590 at the end of each month for the next 38 years (456 months). Calculate your accumulated investment at the end of 38 years. (Round to nearest dollar)