Reference no: EM131620388

Finance Discussion Questions: TVM

Use future value formula: future value, simple interest, and compound interest,

1. Your aunt is planning to invest in a bank CD that will pay 6.50 percent interest semi-annually. If she has $6,500 to invest, how much will she have at the end of four years? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to the nearest penny.)

Value of investment after 4 years=$____________

2. Roy Gross is considering an investment that pays 6.80 percent. How much will he have to invest today so that the investment will be worth $29,000 in six years? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to the nearest penny.)

Amount to be invested today=$____________

3. You are a freshman in college and are planning a trip to Europe when you graduate from college at the end of four years. You plan to save the following amounts annually, starting today: $774, $636, $686, and $675. If the account pays 4.10 percent annually, how much will you have at the end of four years? (Round answer to 2 decimal places, e.g. 15.25.)

Future value=$____________

4. Jeremy Fenloch borrowed some money from his friend and promised to repay him the amounts of $1,255, $1,365, $1,525, $1,560, and $1,585 over the next five years. If the friend normally discounts investments cash flows at 8.50 percent annually, how much did Jeremy borrow? (Round answer to 2 decimal places, e.g. 15.25.)

Present value=$____________

5. Cecelia Thomas is a sales executive at a Baltimore firm. She is 25 years old and plans to invest $3,000 every year in an IRA account, beginning at the end of this year until she turns 65 years old. If the IRA investment will earn 9.60 percent annually, how much will she have in 40 years, when she turns 65? (Round intermediate calculations to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25.)

Future value of investment=$____________

6. The Elkridge Bar & Grill has a seven-year loan of $30,000 with Bank of America. It plans to repay the loan in seven equal installments starting today. If the rate of interest is 11.00 percent, how much will each payment be? (Round intermediate calculations to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25.)

Elkridge Bar& Grill's payment=$____________

7. Calculate the annual cash flows for each of the following investments:

$246,000 invested at 6 percent. Annual cash flows =____________
$55,000 invested at 12 percent. Annual cash flows=____________
$121,000 invested at 10 percent. Annual cash flows=____________

8. CelebNav, Inc. had sales last year of $630,000, and the analysts are predicting a good year for the start-up, with sales growing 19 percent a year for the next three years. After that, the sales should grow 13 percent per year for two years, at which time the owners are planning to sell the company. What are the projected sales for the last year before the sale? (Round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)

Projected sales in year 5 = $____________

9. Stephanie Watson plans to make the following investment beginning next year. She will invest $2,550 in each of the next three years, and will then make investments of $3,650, $3,725, $3,875, and $4,000 over the following four years. If the investments are expected to earn 12.10 percent annually, how much will Stephanie have at the end of the seven years? (Round answer to 2 decimal places, e.g. 15.25.)

Future Value=$____________

10. Jeremy Denham plans to save $4,900 every year for the next eight years, starting today. At the end of eight years, Jeremy will turn 30 years old and plans to use his savings toward the down payment on a house. If his investment in a mutual fund will earn him 8.50 percent annually, how much will he have saved in eight years when he buys his house? (Round intermediate calculations to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25.)

Future value of investment =____________.