Question

1, Leon Taylor is settling a $19,080 loan due today by making 6 equal annual payments of $4,640.74.
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Determine the interest rate on this loan, if the payments begin one year after the loan is signed. (Round answer to 0 decimal places, e.g. 8%.)

2, Sally Alvarez is investing $395,500 in a fund that earns 9% interest compounded annually.
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What equal amounts can Sally withdraw at the end of each of the next 14 years? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

3, Stacy Medavoy will invest $6,420 a year for 24 years in a fund that will earn 5% annual interest.
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If the first payment into the fund occurs today, what amount will be in the fund in 24 years? If the first payment occurs at year-end, what amount will be in the fund in 24 years? (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)

4, Alan Newman will invest $10,610 today in a fund that earns 8% annual interest.
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How many years will it take for the fund to grow to $24,739?

5, Julia Willis will invest $32,300 today. She needs $390,840 in 22 years.
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What annual interest rate must she earn? (Round answer to 0 decimal places, e.g. 7%.)

Answer 1

Answer to Question 1:

Amount of loan = $19,080
Annual payment = $4,640.74
Number of payments = 6

Let interest rate be i%

$19,080 = $4,640.74 * PVA of $1 (i%, 6)
PVA of $1 (i%, 6) = 4.11141

Using PVA of $1 table values, i = 12%

Interest rate on this loan is 12%

Answer to Question 2:

Amount invested = $395,500
Interest rate = 9%
Number of withdrawals = 14

Annual withdrawals = $395,500 / PVA of $1 (9%, 14)
Annual withdrawals = $395,500 / 7.78615
Annual withdrawals = $50,795