The following situations should be considered independently.

1. John Jamison wants to accumulate $60,000 for a down payment on a small business. He will invest $30,000 today in a bank account paying 8% interest compounded annually. Approximately how long will it take John to reach his goal?

2. The Jasmine Tea Company purchased merchandise from a supplier for $28,700. Payment was a noninterest-bearing note requiring Jasmine to make five annual payments of $7,000 beginning one year from the date of purchase. What is the interest rate implicit in this agreement?

3. Sam Robinson borrowed $10,000 from a friend and promised to pay the loan in 10 equal annual installments beginning one year from the date of the loan. Sam's friend would like to be reimbursed for the time value of money at a 9% annual rate. What is the annual payment Sam must make to pay back his friend?

 

Part 1:
JOHN JAMISON
Amount needed to accumulate	$ 60,000
Amount invested today	$ 30,000
Desired rate of return:
Annually compounded interest	8%
Part 2:
JASMINE TEA COMPANY
Amount paid for merchandise	$ 28,700
Required annual payments	$ 7,000
Number of payments required	5
Part 3:
SAM ROBINSON
Amount borrowed	$ 10,000
Number of installments	10
Annual rate	9%