Reference no: EM13865738
Problem 1 - Future Value of Investment
If a firm has $250,000 to invest and can earn 8.5%, compounded annually, how much will the firm have after two years?
Rate
Nper
PMT
PV
Type
FV
Problem 2 - Future Value of Retirement Account
A self-employed person deposits $1,250 annually in a retirement account that earns 5.5%.
What will be the account balance at age 62 if the savings program starts when the individual is age 50?
Rate
Nper
PMT
PV
Type
FV
How much additional money will be in the account if the saver defers retirement until age 66 and continues the annual contributions until then?
Hint: First calculate the FV of the account at age 66 and then subtract the FV determined above (at age 62) to arrive at the additional money saved.
Rate
Nper
PMT
PV
Type
FV
Additional money saved if the contributions continue until age 66
The first part is a repeat of 1a.
How much additional money will be in the account if the saver discontinues the contributions at age 62, but lets it build up until retirement at age 66?
Hint: First calculate the FV of the account at age 62, then utilize the FV of the account at age 62 as the PV in the FV calculation for the next 4 years.
Finally, subtract the FV of the account at age 62 from the FV of the account with no additional contributions to arrive at the additional money saved.
Rate
Nper
PMT
PV
Type
FV
Rate
Nper
PMT
PV
Type
FV
Additional money saved if contributions stop at age 62, but the money keeps growing until age 66.
Problem 3 - Present Value of Savings Account
A father has decided to set aside a one time lump sum for college that will amount to $60,000 by the time
his 5 year old is 18 years old (13 years). Using 8% as the rate and assuming no further investments will be made,
how much must the father invest today in order to have $60,000 in 13 years?
Rate
Nper
PMT
FV
Type
PV
Problem 4 - Home Loan
A couple borrows $935,000 for 7 years for the purchase of a vacation home at an interest rate of 7%.
The loan requires that the interest and principal be paid in equal, annual payments.
The interest is determined on the declining balance that is owed.
What are the required annual payments on the loan?
Rate
Nper
PV
FV
Type
PMT Yearly payment owed
How much is the principal loan balance reduced by during the first year?
Hint: To determine the principal paid in year 1, subtract the interest paid in year 1 from the total yearly payment.
Rate
Principal loan value
Interest paid in year 1
Total payment made in year 1
Principal paid the first year
Problem 4 - Home Loan
A couple borrows $935,000 for 7 years for the purchase of a vacation home at an interest rate of 7%.
The loan requires that the interest and principal be paid in equal, annual payments.
The interest is determined on the declining balance that is owed.
What are the required annual payments on the loan?
Rate
Nper
PV
FV
Type
PMT Yearly payment owed
How much is the principal loan balance reduced by during the first year?
Hint: To determine the principal paid in year 1, subtract the interest paid in year 1 from the total yearly payment.
Rate
Principal loan value
Interest paid in year 1
Total payment made in year 1
Principal paid the first year
Problem 5 - Lease Payments
A company leases equipment for 7 years.
The equipment costs $28,000 and the owner wants to earn 9.5% on the lease.
What should be the required lease payments?
Rate
Nper
PV
FV
Type
PMT
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