Problem 1:

You want to buy a house in 4 years and expect to need $25,000 for a down payment. If you have $15,000 to invest, how much interest do you have to earn (compounded annually) to reach your goal?

Problem 2:

You want to buy your dream car, but you are $5,000 short. If you could invest your entire savings of $2,350 at an annual interest of 12%, how long would you have to wait until you have accumulated enough money to buy the car?

Problem 3:

What is the future value of cash flows 1-5 at the end of year 5, assuming a 6% interest rate (compounded annually)?

End of year Cash flow

1 $2,500

2 3,000

3 1,250

4 3,500

5 1,250

6 4,530

7 2,350