FIN 320 Create in Excel. Enjoy the problems! Chapter 5

1. You invested $1,650 in an account that pays 6 percent simple interest. How much more could you have earned over a 20-year period if the interest had compounded annually?

2. Penn Station is saving money to build a new loading platform. Two years ago, they set aside $24,000 for this purpose. Today, that account is worth $28,399. What rate of interest is Penn Station earning on this investment?

3. Assume the total expense for your current year in college equals $30,000. Approximately how much would your parents have needed to invest 20 years ago in an account paying 8% compounded annually to cover this amount?

4. How much will accumulate in an account with an initial deposit of $2000, and which earns 6% interest compounded quarterly for three years?

5. You just won the grand prize in a national writing contest! As your prize, you will receive $1,500 a year for ten years. If you can earn 8 percent on your money, what is this prize worth to you today?

6. What is the present value of the following set of cash flows at an interest rate of 6%; $2,000 at end of year one, $3,000 at end of year two, and $5,000 at end of year four?

7. How much must be saved annually in order to accumulate $100,000 over the next 20 years, earning 4% annually?

8. Alexa plans on saving $6,000 a year and expects to earn an annual rate of 5 percent. How much will she have in her account at the end of 30 years?

9. What is the present value of a five period annuity due of $2,000 if the interest rate is 9%?

10. What is the effective annual interest rate on a 8% APR automobile loan that has monthly payments?