# annual interest.....

## Project Description:

compu has become a success over the past few years, and bill and melinda jobs decide it is time to meet with a financial planner to make certain his personal finances are in order. bill has the following questions he needs help in answering regarding his current and future financial goals.

1. bill originally borrowed \$50,000 to begin compu from a local bank. he is required to pay \$10,955.89 per year for seven years. what is the annual interest rate on the loan?

2. bill just purchased a new car; the selling price was \$26,000. he put \$1,000 down, his monthly payments are \$610.32, and the annual interest rate is 8%. how many payments must he make?

3. bill is thinking about taking out a home equity loan of \$10,000. if he agrees to pay a lump sum of \$17,623.42 in 5 years, what annual rate of interest is he paying?

4. bill has \$20,000 in an account that pays 5%. he plans to withdraw \$12,500 in five years to send his son bill jr. to college. his daughter linda will start college in eight years. how much will be in the account at that time?

5. what will his \$2,000 money market account be worth in 4.5 years if the account pays 6% interest compounded quarterly?

6. bill and melinda are also interest in buying a vacation house and want to save \$8,048.45 for a down payment. if they deposit \$500 per month in a savings account which pays 1% per month, how long will it take them to save the \$8,048.45?

7. bill’s mother passed away and left them \$32,976. they plan to put the entire amount into an account earning 8% compounded annually and to withdraw \$4,000 at the end of each year. how many years can they continue to make the withdrawals?

8. if their opportunity cost is 10%, how much should they pay for an investment promising \$750 per year for the first four years and \$450 for the next six?

9. if they deposit \$1,000 each year in a savings account earning 4% compounded annually, how much will they have in 10 years?

10. if they have an opportunity cost of 10%, how much should they be willing to invest each year to have \$8,000 accumulated in 10 years?

11. consider an investment that has cash flows of \$500 the first year and \$400 for the next 4 years. if their opportunity cost is 10%, how much should they pay for the investment?

12. compu’s earnings per share grew constantly from \$2.00 in 2004 to \$2.52 in 2007. what was the compound annual growth rate in earnings per share over the period?

13. if they deposit \$2,000 in a bank account that pays 6% interest, how many periods will it take for the deposit to grow to \$3,720.59 if the interest is compounded semi-annually?

14. if their required return is 12%, how much should they pay for a bond that pays \$100 per year forever?

15. a retirement plan guarantees to pay them a fixed amount for 20 years. at the time of retirement they will have \$31,360 to their credit in the plan. the plan anticipates earning 8% interest annually over the period they receive benefits. how much will their annual benefits be assuming the first payment occurs 1 year from their retirement date?

16. if they deposit \$2,000 in a bank account that pays 12% interest annually and if the interest is compounded continuously, how much money will be in the account at the end of 20 years?

17. how much money must they pay into an account at the beginning of each of the next 20 years in order to have \$10,000 at the end of the 20th year? assume that the account pays 10% per annum.

18. if they pay \$100 into an account at the beginning of each of the next 40 years (the account pays 12%), how much will be in the account at the end of year forty?

19. at the beginning of the 41st year they plan to put the money from the previous question in a 30 year annuity whose first payment comes at the end of the 41st year (the account pays 12%). how much will they receive at the end of the 41st year (i.e. the first annuity payment)?

20. assume it is january 1st and bill has just established an ira (individual retirement account). he will put \$1,000 into the account on december 31st of this year and at the end of each year for the following 39 years (40 years total). how much money will bill have in his account at the beginning of the 41st year? assume that the account pays 10% interest compounded annually.
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