LET US DO THE FOLLOWING

5-1 FUTURE VALUE If you deposit $2,000 in a bank account that pays 6% interest annually, how much will be in your account after 5 years?

5-3 FINDING THE REQUIRED INTEREST RATE Your parents will retire in 19 years. They currently have $350,000 saved, and they think they will need $800,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

5-4 TIME FOR A LUMP SUM TO DOUBLE If you deposit money today in an account that pays 4% annual interest, how long will it take to double your money?

5-9 PRESENT AND FUTURE VALUES FOR DIFFERENT PERIODS Find the following values using the equations and then a financial calculator. Compounding/discounting occurs annually.

An initial $600 compounded for 1 year at 6%

An initial $600 compounded for 2 years at 6%

The present value of $600 due in 1 year at a discount rate of 6%

The present value of $600 due in 2 years at a discount rate of 6%

5-11 GROWTH RATES Sawyer Corporation's 2017 sales were $5 million. Its 2012 sales were $2.5 million.

At what rate have sales been growing?

Suppose someone made this statement: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year." Is the statement correct?

5-15 PRESENT VALUE OF AN ANNUITY Find the present values of these ordinary annuities. Discounting occurs once a year.

$600 per year for 12 years at 8%

$300 per year for 6 years at 4%

$500 per year for 6 years at 0%

Rework parts a, b, and c assuming they are annuities due.

5-17 EFFECTIVE INTEREST RATE You borrow $230,000; the annual loan payments are $20,430.31 for 30 years. What interest rate are you being charged?

5-18 UNEVEN CASH FLOW STREAM

Find the present values of the following cash flow streams at a 5% discount rate.

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