Question

1.What is the discount rate assuming the present value of $840 at the end of 1-year is $765?

2.What is the Future value of $3,500 deposited for 12 years at 5% compounded annually?

3. If $2,800 is discounted back 4 years at an interest rate of 8% compounded semi-annually, what would be the present value?

4. Determine the future value of $6,000 after 5 years if the appropriate interest rate is 8%, compounded monthly.

5. Consider a newlywed who is planning a wedding anniversary gift of a trip to Dubai for her husband at the end of 10 years. She will have enough to pay for the trip if she invests $5,000 per year until that anniversary and plans to make her first $5,000 investment on their first anniversary. Assume her investment earns an 8 percent interest rate, how much will she have saved for their trip if the interest is compounded in each of the following ways? a. Annually b. Quarterly c. Monthly

6. If you applied for a loan of $10,000 from two different banks, and Bank Y makes an offer to charge interest of 7% compounded monthly and Bank Z offers you 8% annual interest due at the end of the year. What will be the difference in the Effective Interest Rate charged by the two banks?

7. Your grandfather left an inheritance for you of $50,000. However you can only drawdown on the investment as follows: Years 1 – 4 $10,000 and Year 5 $40,000 Interest on the fund is 7.5%. What is the present worth of this inheritance?

8. Your choice of vehicle is the Honda CRV, which you plan to purchase in 5 years time after you have completed your studies. You plan to save a certain sum of money every quarter for the next 5 years, and the bank offers you a rate of 8% per annum on your savings. How much do you need to save every quarter to meet the price of your vehicle which is $150, 000.

Answer 1