Reference no: EM132003293

1. What will be the approximate population of the United States, if its current population of 316 million grows at a compound rate of 2.1% annually for 25 years?

2. Walt is evaluating an investment that will provide the following returns at the end of each of the following years: year 1, $12,500; year 2, $10,000; year 3, $7,500; year 4, $5,000; year 5, $2,500; year 6, $0; and year 7, $12,500. Walt believes that he should earn an annual rate of 8 percent on this investment. How much should he pay for this investment?

3. Assume that Claudia started a paper route on January 1, 1970. Since that day, at the end of every three (3) months (first deposit made on April 1, 1970), she deposited $500.00 into a savings account, which paid her interest of 4 percent annually but with quarterly compounding. On January 1, 1980, she took the balance in her savings account and transferred it to an account that paid 11.5% p.a. Assuming that Claudia did not deposit any additional money into the account after the transfer, how much did she have in her account on January 1, 2014?

4. On the day that his first child was born, Ezio Auditore de Firenze deposited $3,000 into an investment account. The only purpose for the account was to pay for his son’s first year of college tuition. Assume that his son, Flavia, started college on his 18th birthday and his first year tuition payment had to be made that day. The amount needed on that day was $26,000. If that was indeed the amount of money in the account on Flavia’s 18th birthday, what annual rate of return did Ezio earn on his investment account?

5. Desmond Miles has $1,500 that he will use as a down payment on a car. Assuming that he can afford a payment of $225 per month, how much can Desmond spend on a car (that is, what is the total cost of the car that Desmond can purchase) if the interest rate is 5.75% and if he will finance his purchase with a 5 year, monthly payment loan?

6. Suppose you deposit $5,000 into an account earning 4 percent interest, compounded monthly. How many years (rounded to one decimal place – for example, 32.1843 year = 32.2) will it take for your account to be worth $8,500?

7. Suppose you deposit $5,000 into an account earning 4 percent interest, compounded monthly and you also make monthly contributions of $50 (first monthly contribution made one month after the initial deposit is made). How many years (rounded to one decimal place – for example, 32.1843 year = 32.2) will it take for the account to grow to $7,500 in this case?

8. Assume that I am trying to borrow money from you to finance my business. Assume that I promise to repay you in three installments, one payment of $5,000 to be made exactly 2 years from today, a second payment of $10,000 to be made exactly 5 years from today, and a final payment of $15,000 to be made 8 years from today. If your opportunity cost of funds is 7.5% p.a., (that is, use an interest rate of 7.5% for this question), how much should be willing to lend me today?

9. What is the future value at the end of year 25 of depositing $5,000 today, $3,500 at the end of years 1, 2 and 3, $5,000 at the end of years 4, 5, 6 and 7 and $4,250 at the end of years 8, 9, 10, 11 and 12 into an account that pays 9.5% p.a.? (No deposits will be made into the account after year 12).

10. If you wanted to fund a scholarship that would pay $12,500 per year forever at GSU, how much would you have to deposit today if you wanted the scholarship to start paying five (5) years from today? Assume the endowment could earn 6.25% p.a. interest forever.

11. You currently owe $20,000 on a car loan at 8.25 percent interest. If you make monthly payments of $596.59 per month, how long (i.e., number of months rounded to one decimal place) will it take you to fully repay the loan?

12. It is now January 1. You plan to make 5 deposits of $300 each, one every 6 months, with the first payment being made exactly six months from today. If the bank pays a nominal interest rate of 12% but uses semiannual compounding, how much will be in your account exactly 12 years from today?

13. You must make a payment of $3,800 exactly 8 years from today. To prepare for this payment, you will make 5 equal deposits into an account that pays a nominal interest rate of 7.6% p.a., with quarterly compounding. If your first deposit is made today (and then you make four additional deposits in each of the next four quarters – that is, a deposit 3 months from today, another 6 months from today and so on), what must each of the 5 payments be for you to exactly achieve your goal?