1. You want to save your money for a down-payment on a home in ten years.You currently have $8,000 invested today at a 6% rate compounded annually. You plan to deposit $1200 at the beginning of each year for ten years. What is the maximum amount you will have at the end of ten years?

2. You find out you will inherit $250,000 in six years. If the current interest rate is 4% compounded quarterly, what is the present value of your inheritance?

3. You plan to deposit the following amounts in your savings account at the beginning of each year. In Year 1, you plan to deposit $3500. In year 2, you plan to deposit $3500. In Year 3, Year 4 and Year 5, you plan to deposit $4500. Assume the savings account earns 5.25% compounded annually. If you you plan, how much will you have at the end of ten years?

4. You plan to deposit the following amounts in your savings account at the beginning of each year. In Year 1, you plan to deposit $3600. In year 2, you plan to deposit $0. In Year 3, you plan to deposit $4000 and in Year 4 you plan to deposit $5000. Assume the savings account earns 2.5% compounded semiannually. If you you plan, how much will you have at the end of ten years?

5. You deposit equal payments of $1000 in the bank for the next 5 years only. Assume the payments are made at the beginningof the year. What is the interest rate that you would earn if you have $7,600 at the end of six years? Assume annual compounding.Does your equal payment period match the compounding period? ____

6. Assume you receive payments from an investment at the end of each year. What is the present value of an investment that promises to pay the following: $1,000 received at the end of each year for 3 years. Assume an 8% interest rate compounded semiannually. Does your equal payment period match the compounding period? ______

7. You deposit equal payments of $1000 in the bank for the next 6 years. Assume the payments are made at the beginning of each year. What is the nominal interest rate you earn if you have $8,000 at the end of six years with annual compounding? Does your equal payment period match the compounding period?

8. You deposit equal payments of $1000 in the bank for the next seven years. Assume the payments are made at the end of each year. Given you will have $15,000 at the end of ten years with semiannual compounding. What is the effective rate, the nominal rate and the periodic rate of this investment? Does your equal payment period match your compounding period?

9. Loan Amortization - You borrowed $10,000 from the bank. You plan to pay it back in four years. You are charged 3.45% annual compounding. Complete the following table.

Year

BeginningBalance

Total Payment

Interest Paid

Principal Paid

Ending Balance

1

2

3

4

Answer rating: 100% (QA)

To answer these questions we will use the formulas for compound interest and loan amortization 1 To calculate the maximum amount you will have at the end of ten years we can use the formula for compou... View the full answer