Chapter 2 Financial Planning Exercise 6 Calculating present and future values

Use future or present value techniques to solve the following problems.

1. If you inherited $20,000 today and invested all of it in a security that paid a 7 percent rate of return, how much would you have in 30 years? Round the answer to the nearest cent. Round FV-factor to three decimal places. Calculate your answer based on the FV-factor.

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   Calculate your answer based on the financial calculator.

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2. If the average new home costs $300,000 today, how much will it cost in 9 years if the price increases by 4 percent each year? Round the answer to the nearest cent. Round FV-factor to three decimal places. Calculate your answer based on the FV-factor.

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   Calculate your answer based on the financial calculator.

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3. You forecast that in 12 years it will cost $240,000 to provide your child a 4-year college education. Will you have enough if you take $76,000 today and invest it for the next 12 years at 8 percent? Round the answer to the nearest cent. Round FV-factor and FVA-factors to three decimal places. -Select-YesNoItem 5 , you will have approximately

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   -Select-morelessItem 7 than your estimate of $240,000.
4. If you can earn 3 percent, how much will you have to save each year if you want to retire in 40 years with $1.8 million? Round the answer to the nearest cent. Round FVA-factor to three decimal places. Calculate your answer based on the FVA-factor.

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   Calculate your answer based on the financial calculator.

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