Time Value of Money II - Worksheet

1. You want to be a millionaire in 25 years. If you earn 10% on your investments, how much do you have to see each year to hit the $1,000,000 mark?

Table__________

2. Amy is 65 and has $350,000 in her retirement account. An actuary has determined that if her investments earn 7%, she can withdraw $32,300 annually. How many more years does the actuary expect Amy to live?

Table__________

3.. Karla sued her landlord 5 years ago for damage to her things from a water leak and won a judgment against him. The original award was $15,500, but she finally received $18,858, which included interest. What is the rate of interest she received?

Table___________

Ty bought a new car for $25,000. He put $2,000 down and financed the rest with the dealer who had a special offer of 2% interest for 60 monthly payments. How much will Ty pay each month?

EXCEL function used:

Inputs:

Result:

Twins Taylor and Tanner both received $1,000 from their grandmother for their birthday. She told them they had to save it for 5 years. Taylor found an account paying 4.5% with monthly compounding. Tanner elected an account paying 5% with annual compounding. Who will have more at the end of the five years?

EXCEL template used:

Inputs:

Results:

Piper has $300,000 for her retirement. She is considering investing in a 20-year, 7% annuity and is trying to determine whether she should take the payments quarterly or monthly. Under which method would she get the most money each year?

EXCEL function:

Input:

Results:

Twins Kate and Allie will be going to college in 15 years. Their parents have decided that Dad will start a savings fund for Kate. He will deposit $2,000 into an account the first of each year. That account earns 7% and interest is compounded annually. Their mother will also deposit $2,000 into an account for Allie, but she is going to make those deposits at the end of each quarter and the account pays 7.5% compounded quarterly. Who will have more in her college fund?

EXCEL function:

Input:

Results: