In: Finance
4.15 Chapter 4 HW - Problem Mastery
answer as many as you can, please and thank you in advanced.
1) How long must one wait (to the nearest year) for an initial
investment of $1,000 to triple in value if the investment earns 8%
compounded annually?
2) What is the future value of $10,000 deposited today in a bank
account that pays 8.8% interest rate after 5 years?
3) How much can be accumulated for retirement if $2000 is deposited
annually, beginning one year from today, and the account earns 7%
interest compounded annually for 39 years?
5) A perpetuity of $7,826 per year is said to offer a 6% interest
rate. What is its present value?
6) What is the future value of $540 to be deposited today into an
account paying 8.0% compounded semi-annually for two years?
7) You just won a lottery that promises to pay you $1 million
exactly 10 years from today. Because the $1 million payment is
guaranteed by the state in which you live, opportunities exist to
sell the claim today for an immediate lump-sum cash payment. What
is the least you will sell your claim for if you could earn 5.99 %
on similar-risk investments during the 10-year period?
10) What is the future value of a five-year ordinary annuity of
$1,000 per year if the interest rate is 7.12%? Hint: solve for year
5.
11) What is the present value of a perpetuity that offers to pay
$100 next year and every year after the payment grows at 3.5%.
Investments with similar risk are offering an 8% annual
return.
12) Your bank is offering a certificate of deposit with an APR of
3.38% compounded monthly. What is the effective annual rate?