PROBLEMS Easy Problems 5-1 1-8 5-2 5-3 5-4 FUTURE VALUE If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years? PRESENT VALUE What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually? FINDING THE REQUIRED INTEREST RATE Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds? TIME FOR A LUMP SUM TO DOUBLE If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money? TIME TO REACH A FINANCIAL GOAL You have $42,180.53 in a brokerage account, and you plan to deposit an additional $5,000 at the end of every future year until your account totals $250,000. You expect to earn 12% annually on the account. How many years will it take to reach your goal? FUTURE VALUE: ANNUITY VERSUS ANNUITY DUE What's the future value of a 7%, 5-year ordinary annuity that pays $300 each year? If this was an annuity due, what would its future value be? 5-5 5-6 5-11 GROWTH RATES Shalit Corporation's 2010 sales were $12 million. Its 2005 sales were $6 million At what rate have sales been growing? b. 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 that statement correct