Question
Your wealthy uncle established a $2,500 bank account for you when you were born. For the first 8 years of your life, the interest rate
Your wealthy uncle established a $2,500 bank account for you when you were born. For the first 8 years of your life, the interest rate earned on the account was 6%. Since then, rates have been only 4%. Now you are 21 years old and ready to cash in. How much is in your account? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Amount:
Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1919. It is now 2019.
a. If your great grandfather invested $1,000 in 1919, how much would that investment be worth today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment:
b. If an investment in 1919 has grown to $1 million, how much was invested in 1919? (Enter your answer in dollars. Do not round intermediate calculations. Round your answer to 2 decimal places.) Present Value:
Compute the present value of a $170 cash flow for the following combinations of discount rates and times. (Do not round intermediate calculations. Round your answers to 2 decimal places.
a. r = 10%; t = 9 years
b. r = 10%; t = 18 years
c. r = 5%; t = 9 years
d. r = 5%; t = 18 years
a. present value:
b.present value:
c.present value:
d.present value:
What is the present value of the following cash-flow stream if the interest rate is 5%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Year | Cash Flow | ||
1 | $ | 160 | |
2 | 360 | ||
3 | 260 | ||
present value:
Compute the future value of a $165 cash flow for the following combinations of rates and times. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a. r = 8%; t = 10 years
b. r = 8%; t = 20 years
c. r = 4%; t = 10 years
d. r = 4%; t = 20 years
a.
b.
c.
d.
Old Time Savings Bank pays 4% interest on its savings accounts. If you deposit $1,600 in the bank and leave it there: (Do not round intermediate calculations. Round your answers to 2 decimal places.)
a. How much interest will you earn in the first year?
a. first year interest:
b. How much interest will you earn in the second year?
b. second year interest:
c. How much interest will you earn in the 10th year?
c.tenth year interest:
In 1880 five aboriginal trackers were each promised the equivalent of 50 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 1996 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the $50. However, the granddaughters also claimed that they were entitled to compound interest.
a. How much was each granddaughter entitled to if the interest rate was 3%? (Do not round intermediate calculations. Round your answer to 2 decimal places.
future value _______ australlian dollars
b. How much was each entitled to if the interest rate was 6%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
future value _______ australlian dollars
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