Question

# a. How much would you have to deposit today if you wanted to have \$42,000 in...

a. How much would you have to deposit today if you wanted to have \$42,000 in three years? Annual interest rate is 10%. (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.)

b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 6% on your investments, how much would you have to deposit today to have \$10,500 when you graduate? (Round your answer to 2 decimal places.)

c-1. Calculate the future value of an investment of \$499 for nine years earning an interest of 10%. (Round your answer to 2 decimal places.)

d. Assume that a college parking sticker today costs \$62. If the cost of parking is increasing at the rate of 6% per year, how much will the college parking sticker cost in seven years? (Round your answer to 2 decimal places.)

a.

Future value = Amount required after 3 years = \$42,000

Annual interest rate = 10%

Present value = Future value / (1 + Interest rate)No. of periods

Amount to be deposited today = \$\$42,000 / 1.103 = \$42,000 /1.331

=> \$31555.22

b.

Amount required after 2 years from now = \$10,500

Annual interest rate = 6%

Present value = Future value / (1 + Interest rate)No. of periods

Deposit today = \$10,500/1.062

= \$10,500/1.1236

=>\$9,344.96

c-1.

Value of investment now = \$499

Annual interest rate = 10%

Period = 9 years

Future value = Present value * (1 + Interest rate)No. of periods

Value of investment after 9 years = \$499 * 1.109

=\$499*2.3579

=\$1,176.59

d.

Future value = Present value * ( 1 + Interest rate)No. of periods

Future value = \$62 * (1 + .06)7

=\$62*1.50

=>\$93