Prize continues increasing at the same rate

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Reference no: EM131567437

1. You own a classic automobile that is currently valued at $150,000. If the value increases by 6.5 percent annually, how much will the automobile be worth ten years from now?

2. Your father invested a lump sum 26 years ago at 4.25 percent interest. Today, he gave you the proceeds of that investment which totaled $51,480.79. How much did your father originally invest?

3. One year ago, you invested $1,800. Today it is worth $1,924.62. What rate of interest did you earn?

4. Some time ago, Julie purchased eleven acres of land costing $36,900. Today, that land is valued at $214,800. How long has she owned this land if the price of the land has been increasing at 6 percent per year?

5. In 1895, the winner of a competition was paid $150. In 2006, the winner's prize was $70,000. What will the winner's prize be in 2050 if the prize continues increasing at the same rate?

6. You are scheduled to receive $30,000 in two years. When you receive it, you will invest it for 6 more years, at 6 percent per year. How much money will you have 8 years from now?

7. Your grandmother is gifting you $125 a month for four years while you attend college to earn your bachelor's degree. At a 6 percent (annual) discount rate, what are these payments worth to you on the day you enter college?

8. You are the beneficiary of a life insurance policy. The insurance company informs you that you have two options for receiving the insurance proceeds. You can receive a lump sum of $300,000 today or receive payments of $2,400 a month for 20 years. You can earn 6 percent on your money. Which option should you take and why?

9. You buy an annuity that will pay you $24,000 a year for 25 years. The payments are paid on the first day of each year. What is the value of this annuity today if the discount rate is 9 percent?

10. Trish receives $450 on the first of each month. Josh receives $450 on the last day of each month. Both Trish and Josh will receive payments for next four years. At a 9.5 percent discount rate, what is the difference in the present value of these two sets of payments?

11. You are borrowing $17,800 to buy a car. The terms of the loan call for monthly payments for 5 years at 9 percent interest. What is the amount of each payment?

12. Holiday Tours (HT) has an employment contract with its newly hired CEO. The contract requires a lump sum payment of $10.5 million be paid to the CEO upon the successful completion of her first three years of service. HT wants to set aside an equal amount of money at the end of each year to cover this anticipated cash outflow and will earn 5 percent on the funds. How much must HT set aside each year for this purpose?

13. Kingston Development Corp. purchased a piece of property for $3 million. The firm paid a down payment of 20 percent in cash and financed the balance. The loan terms require monthly payments for 15 years at an annual percentage rate of 8 percent, compounded monthly. What is the amount of each mortgage payment?

Reference no: EM131567437

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