1. Calculate the present value of $4,700 to be received 7 years from today if the annual...
Question:
1. Calculate the present value of $4,700 to be received 7 years from today if the annual interest rate is 8.5 percent.
2. What is the future value of $6,840 invested for 5 years at 7.5 percent compounded annually?
3. Dhari invests $5,000 today. What will be its value four years from now if this amount earns 6% compounded continuously?
4. Sara deposits some amount in a bank that earns 12% interest. For how many years Sara has to keep this money in the bank for it to double in value?
5. What the future value of $3,500 received today and deposited in an account for four years at an annual interest of 8 percent compounded semiannually?
6. Margeret borrows $32,000 from MBK Bank. For a five-year loan, the bank requires annual end-of-year payments of $7,300. What is the annual interest rate on this loan?
7. Wilson plans to fund his individual retirement account, beginning today, with 20 annual deposits of $5,000, which he will continue for the next 20 years. If he can earn an annual compound rate of 7 percent on his deposits, what will be the amount in the account upon retirement?
8. You have been offered a project paying $8,600 at the beginning of each year for the next 15 years. What is the maximum amount of money you would invest in this project if you expect 6.5 percent rate of return to your investment?
9. In their meeting with their advisor, Mr. and Mrs. Smith concluded that they would need $25,000 per year during their retirement years in order to live comfortably. They will retire 10 years from now and expect a 20-year retirement period. Mr. and Mrs. Smith want to accumulate this money in equal annual deposits in a bank account paying 8 percent to reach financial happiness during their retirement. Calculate the amount which Mr. and Mrs. Smith should deposit each year in that account before they retire in 10 years.
10. A generous philanthropist plans to make a one-time endowment to a renowned heart research center which would provide the facility with $380,000 per year into perpetuity. The rate of interest is expected to be 6 percent for all future time periods. How large must the endowment be?
11. $1,800 is received at the end of year 1, $3,500 is received at the end of year 2, and $2,800 is received at the end of year 3. If these cash flows earn 8 percent interest, what will be their combined present value?
12. Roopa is planning for her son's college education to begin six years from today. She estimates the yearly tuition, books, and living expenses to be $10,000 per year for a four-year degree, assuming the expenses incur only at the end of the year. How much must Roopa deposit today, at an interest rate of 7 percent, for her son to be able to withdraw $10,000 per year for four years of college?
13. What is the effective annual rate (EAR) of 8.5% compounded semiannually (two times a year)?
14. Fatima wants to buy a house for KD 650,000 by borrowing this amount from a bank at 5% interest rate. The loan will be repaid in equal monthly payments over 30 years. Calculate the monthly payment on this home mortgage.
15. $1,800 is received at the end of year 1, $2,600 is received at the end of year 2, and $3,800 is received at the end of year 3. If these cash flows earn 12 percent interest rate, what will be their combined future value at the end of year 3?