Your mother just received a $250,000 inheritance. If she invests her money in a diversified equity portfolio returning 8 percent per year, approximately how long will it take her to become a millionaire?

2. Linda Baer has already saved $6,462 to buy a used vehicle. Ignoring taxes and assuming her money is invested in a money market account earning 4 percent compounded annually, how long will it take to buy a car that costs $8,844?
4. Paul just graduated from college and landed his first "real" job, which pays $33,000 a year. In 10 years, what will he need to earn to maintain the same purchasing power if inflation averages 3 percent?
6. Anthony and Michelle Constantino just got married and received $34,000 in cash gifts for their wedding. How much will they have on their 25th anniversary if they place half of this money in a fixed-rate investment earning 6 percent compounded annually? Would the future value be larger or smaller if the compounding period were 6 months? How much more or less would they have earned with this shorter compounding period?
8. Calculate the future value of $5,000 earning 5 percent after 1 year, assuming annual compounding. Now, calculate the future value of $5,000 earning 5 percent after 20 years.
10. Ahmed just turned 23 and wants to have $9,083 saved in 7 years, by his 30th birthday. Assuming no additional deposits, if he currently has $5,300 in an intermediate-term bond fund earning a 6 percent yield, will he reach his goal? If not, what rate of return is required to meet his goal?
12. If anotherAustin Powers movie had been released in 2022 and Dr. Evil, now armed with a financial calculator, wants to hold the Earth ransom for $10,000,000, what inflation rate would Dr. Evil use to make his ransom equivalent to $1 million in 1971? (Hint: Inflation is compounded on an annual basis.)
14. When Aroon was a small child, his grandfather established a trust fund for him to receive $18,000 on his 35th birthday. Aroon just turned 23. What is the value of his trust today if the trust fund earned 9 percent interest? If he had to wait until age 40 to receive the money, what would be the present value of the $18,000 to be received in 17 years?
16. You and 11 coworkers have just won $12 million ($1 million each) from the state lottery. Assuming that you each receive your share over 20 years and that the state lottery earns a 4 percent return on its funds, what is the present value of your prize before taxes if you request the "up-front cash" option?
18. Chen is 65 years old and about to retire. She has $706,000 saved to supplement her pension and Social Security and would like to withdraw it in equal annual dollar amounts so that nothing is left after 17 years. How much does she have to withdraw each year if he earns 7 percent on his money?
20. Assume you are 25 and earn $35,000 per year, never expect to receive a raise, and plan to retire at age 55. If you invest 5 percent of your salary in a 401(k) plan returning 10 percent annually, and the company provides a $0.50 per $1.00 match on your contributions up to 3 percent of your salary, what is the estimated future value of your 401(k) account? Once you retire, how much can you withdraw monthly if you want to deplete your account over 30 years?
22. Shaylea, age 22, just started working full-time and plans to deposit $5,500 annually into an IRA earning 7 percent interest compounded annually. How much will she have in 20 years, in 30 years, and in 40 years? If she changed her investment period and instead invested $458.33 monthly, and the investment also changed to monthly compounding, how much would she have after the same three time periods? Comment on the differences over time.
24. Your grandmother just gave you $6,000. You'd like to see what it might grow to if you invest it.1.Calculate the future value of $6,000, given that it will be invested for 5 years at an annual interest rate of 4 percent.2.Recalculate part (a) using a compounding period that is semiannual (every 6 months) .3.Now let's look at what might happen if you can invest the money at a 8 percent rate rather than a 4 percent rate. Recalculate parts (a) and (b) for a 8 percent annual interest rate. 4.Now let's see what might happen if you invest the money for 12 years rather than 5 years. Recalculate part (a) using a time horizon of 12 years (the annual interest rate is still 4 percent).
26. If you deposit $2,700 today into an account earning an 13 percent annual rate of return, what will your account be worth in 30 years (assuming no further deposits)? In 40 years?
28. Sarah Wiggum would like to make a single investment and have $2 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? If Sarah invests that amount and could earn a 14 percent annual return, how soon could she retire, assuming she is still going to retire when she has $2 million?
30. Kirk Van Houten, who has been married for 23 years, would like to buy his wife an expensive diamond ring with a platinum setting on their 30-year wedding anniversary. Assume that the cost of the ring will be $12,000 in 7 years. Kirk currently has $4,510 to invest. What annual rate of return must Kirk earn on his investment to accumulate enough money to pay for the ring?
32. Seven years ago, Lance Murdock purchased a wooden statue of a Jedi knight for $7,600 to put in his home office. Lance has recently married, and his home office is being converted into a sewing room. His new wife, who has far better taste than Lance, thinks the Jedi knight is hideous and must go immediately. Lance decides to sell it on eBay and only receives $5,200 for it, so he takes a loss on the investment. What is his rate of returnthat is, the value ofi?
34. You are offered $100,000 today or $300,000 in 13 years. Assuming that you can earn 12 percent on your money, which should you choose?
36. In March 1963, Iron Man was first introduced in issue number 39 ofTales of Suspense. The original price for that issue was 12 cents. By March 2018, 55 years later, the value of this comic book had risen to $6,200. What annual rate of interest would you have earned if you had bought the comic in 1963 and sold it in 2018 (55 years later)?
38. You are graduating from college at the end of this semester and have decided to invest $3,000 at the end of each year into a Roth IRA (a retirement investment account that grows tax free and is not taxed when it is liquidated) for the next 30 years. If you earn 5 percent compounded annually on your investment of $3,000 at the end of each year, how much will you have when you retire in 30 years? How much will you have if you wait 10 years before beginning to save and make only 20 payments into your retirement account?
40. To pay for your education, you've taken out $25,000 in student loans. If you make monthly payments over 15 years at 7 percent compounded monthly, how much are your monthly student loan payments?
42. How long will it take to pay off a loan of $48,000 at an annual rate of 10 percent compounded monthly if you make monthly payments of $700 (round up)?
44. You've just bought a new sectional couch for $3,000, and the store you bought it from offers to let you finance the entire purchase at an annual rate of 14 percent compounded monthly. If you take the financing and make monthly payments of $100, how long will it take to pay the loan off? How much will you pay in interest over the life of the loan? (That is, what is the difference between the total of all your payments and the amount of your payments that went toward your principal of $3,000?)
46. Arsenio has a $6,000 debt balance on his Visa card that charges 20.1 percent compounded monthly, and his minimum monthly payment is 3 percent of his debt balance, which is $180. How many months (round up) will it take Arsenio to pay off his credit card debt if he pays the current minimum payment of $180 at the end of each month? If Arsenio makes monthly payments of $230 at the end of each month, how long will it take him to pay off his credit card debt?