Time Value of Money

1. You are considering two separate investments. Both investments pay 7 percent interest. Investment A pays simple interest and Investment B pays compound interest. Which investment should you choose, and why, if you plan on investing for a period of 5 years?
2. You would like to retire in 30 years as a millionaire. If you have $15,000 today, what rate of return do you need to earn to achieve your goal?
3. Youve been saving up to buy your dream house. The total cost will be $2 million. You currently have about $0.3 million. If you can earn 4.5 percent on your money, how long will you have to wait?
4. You have 40 years left until retirement and want to retire with $2 million. Your salary is paid annually, and you will receive $40,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn an 11 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?