Question 1) First Bank pays 5 percent simple interest on its savings account balances, whereas Second Bank
Question:
Question 1) First Bank pays 5 percent simple interest on its savings account balances, whereas Second Bank pays 5 percent interest compounded annually. If you made a $45,000 deposit in each bank, how much more money would you earn from your Second Bank account at the end of 25 years?
Question 2) Assume the total cost of a college education will be $375,000 when your child enters college in 15 years. You presently have $125,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?
Question 3) You're trying to save to buy a new $420,000 house. You have $10,000 today that can be invested at your bank. The bank pays 2.75 percent annual interest on its accounts. How long will it be before you have enough to buy the house?
Question 4) You have just received notification that you have won the $50 million first prize in the Millennium Lottery. However, the prize will be awarded on your 100th birthday (assuming you're around to collect), 80 years from now. What is the present value of your windfall if the appropriate discount rate is 14 percent?
Question 5) You have just made your first $7,500 contribution to your IRA. Assuming you earn an 12 percent rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 15 years before contributing? Does this suggest an investment strategy?
Fundamentals Of Corporate Finance
ISBN: 9780072553079
6th Edition
Authors: Stephen A. Ross, Randolph Westerfield, Bradford D. Jordan