Chapter 4 Part 2

Ate age 20 you invest $1,000 that earns 7 percent each year. At age 30 you invest $1,000 that earns 10 percent per year. In which case would you have more money at age 60?

At age 30 invest $1,000 at 10 percent

Assume you borrow $5,000 today and pay back the loan in one lump sum four years from today. You are charged 8 percent interest per year. What amount will you pay back and how much interest will you pay?


How much do you need to deposit in your account today if you want to have $10,000 accumulated in your account in 6 years? Assume 5% interest rate.


Five years ago, Jane invested $5,000 and locked in an 8 percent annual interest rate for 25 years (end 20 years from now). James can make a 20 year investment today and lock in a 10 percent interest rate. How much money should he invest now in order to ha


An average home in Chicago costs $295,000 if houses are expected to grow at an average rate of 3% per year, what will a house cost in 5 years?


What annual rate of return in earned on a $200 investment when it grows to $850 in 10 years?

15.57 percent

What is the value in year 2 of a $200 cash flow made in year 8 if interest rates are 3 percent?


Assume you borrow $500 from a payday lender. The terms are that you must pay a fee of $75 in advance (today) and one year from now you need to repay $750. What implied interest rate are you paying?

76.47 percent

Your client has been given a trust fund valued at %1 million. She cannot access the money until she turns 68 years old, which is in 12 years. At that time, she can withdraw $30,000 per month. If the trust fund is invested at a 7 percent interest rate, how

99.05 months

If you start making $115 monthly contributions today and continue them for six years, what is their present value if the compounding rate is 12 percent APR? What is the present value of this annuity?


You wish to buy a $30,000 car. The dealer offers you a 5 year loan with a 9 percent APR. What are the monthly payments? what is the monthly payment if you paid interest only?

$622.75; $225.00

What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent?


Given a 5 percent interest rate, comput the present value of deposits made in years 1,2,3 and 4 of $1,000, $1,400, and $1,500