A man decides to deposit $50 in the bank today and to make 10 additional deposits every six months beginning six months from now, the first of which will be $50 and increasing $10 per deposit after that. A few minutes after making the last deposit, he decides to withdraw all the A 25 year old engineer is opening an IRA account at a bank. Her goal is to accumulate $1million dollar in the account by the time she retires from work in 40 years. The bank manager estimates she may expect to receive 8% nominal interest, compounded quarterly, throughout the 40 years. The engineer believes that her income will increase at a 7% annual rate during her career. She wishes to start her IRA with a as low a deposit possible and A bank offering to sell certificate of deposit for $9500. At the end of six months , the bank will pay $10,000 to the certificate owner. Based on a 6 month interest period, compute the nominal interest rate and the effective interest rate. If $200 is deposited in a savings account at the beginning of each of 15 years, and the account draws interest at 7% per year, how much will be in the account at the end of 15 years? A student wants to have $30,000 at graduation 4 years from now to buy a new car. His grandfather gave him $10,000 as a high school graduation present. How much must the student save each year if he deposits the $10,000 today and can earn 12% on both the A young engineer wishes to become a millionaire by the time he is 60 years old. He believes that by careful investment he can earn 15% rate of return. He plans to add a uniform sum of money to his investment program each year beginning on his 20th birthday and continuing through his 59th birthday. How much money must the engineer set aside in this project each year? Ann deposits $100 at the end of each month into her bank savings account. The bank paid 6% nominal interest, compounded and paid quarterly. No interest was paid on money not in the account for the full 3month period. How much was in Ann's account at the end of 3 Picabo borrows $1000. To repay the amount she makes 12 equal monthly payments of $90.30. Determine the following: 1) the effective monthly interest rate, 2) the nominal annual interest rate, 3) the effective annual interest rate. A set of cash flows begins at $50,000 the first year with an increase each year until 15 years. If the interest rate is 7%, what is the present value when a) The annual increase is $5000? b) The annual increase is 10% ? A local finance company will loan $10,000 to a homeowner. It is to be paid in 24 monthly payments of $499 each. The first payment is due 30 days after the $ 10,000 is received. What interest rate per month are they charging? A woman made 10 annual endof-year purchases of $ 1000worth of common stock. The stock paid no dividends. Then for 4 years she held the stock. At the end of 4 years she all the stocks for $ 28,000. What interest rate did she obtain on her investment? A company deposits $ 2000 in a bank at the end of each year for 10 years. The company makes no deposit during the subsequent 5 years. If the bank pays 8% interest, how much would be in the account at the end of 15 years. A man borrowed $500 from a bank on October 15th. He must repay the loan in 16 equal monthly payments, due on 15th of each month, beginning Nov. 15th. If the interest rate charged is 12% compounded monthly, how much he must pay each month. How much will accumulate in an Individual Retirement Account (IRA) in 15 years if $500 is deposited quarterly (at the end of each quarter) during that time. The account earns 12%interest compounded quarterly. What is the effective interest rate? How much will accumulate if deposits grow (geometric gradient) by 1.5% quarter? Year Revenue 1 $300,000 2 $600,000 3 $900,000 4 $1,200,000 5 $1,500,000 6 $1,800,000 7 $1,500,000 8 $1,200,000 9 $900,000 10 $600,000 11 $300,000 At an 8% annual interest rate, what is the present value of the cash flows? To receive full credit you must use 2 arithmetic gradients. Construct cash flow diagrams and show all your work. Year Revenue 1 $100 2 $100 3 $110 4 $120 5 $130 6 $140 7 $150 8 $140 9 $130 10 $120 11 $110 12 $100 13 $100 At a 10% annual interest rate (compounded yearly), what is the present value of the cash flows? To receive full credit you must use 2 arithmetic gradients. Construct cash flow diagrams and show all your work