Reference no: EM132530849

1) Old Time Savings Bank pays 3% interest on its savings accounts. If you deposit $3,000 in the bank and leave it there: (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a. How much interest will you earn in the first year?

b. How much interest will you earn in the second year?

c. How much interest will you earn in the 10th year?

2)Compute the future value of a $120 cash flow for the following combinations of rates and times. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a. r = 8%; t = 10 years

b. r = 8%; t = 20 years

c. r = 4%; t = 10 years

d. r = 4%; t = 20 years

3)In 1880 five aboriginal trackers were each promised the equivalent of 100 Australian dollars for helping to capture the notorious outlaw Ned Kelley. In 2000 the granddaughters of two of the trackers claimed that this reward had not been paid. The Victorian prime minister stated that if this was true, the government would be happy to pay the $100. However, the granddaughters also claimed that they were entitled to compound interest.

a. How much was each granddaughter entitled to if the interest rate was 3%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. How much was each entitled to if the interest rate was 6%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

4)A factory costs $410,000. You forecast that it will produce cash inflows of $125,000 in year 1, $185,000 in year 2, and $310,000 in year 3. The discount rate is 11%.

a. What is the value of the factory? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. Is the factory a good investment?