Question

1. For the next 6 years, you pan to make equal quarterly deposits of $600.00 into an account paying 8% compounded quarterly. How much will be the total you have at the end of the time?

2. How much money will you have to deposit now if you wish to have $5,000 at the end of 8 years. Interest is to be at the rate of 6% compounded semiannually?

3. In the California “Million Dollar Lottery” a winner is paid the million dollars at the rate of $50,000 semiannually for 10 years. Assume that th ese payments form an annuity, and that the lottery manager can invest money at 8% compounded semiannually. Find the sum that the Lottery Commission must invest now to pay off the “Million Dollar” winner. Also, find the amount of interest involved.

4. You o we $6800 to your mother. You have agreed to make monthly payments over the next 5 years at 8% compounded monthly. After 2 years of payments, you have decided to pay your mother the remaining balance. What was the initial payment and what was the remaini ng balance after 2 years of payments?

5. In 6 years you wish to have a sinking fund of $18,000. How much will you have to deposit each quarter if interest is 12% compounded quarterly?

6. How much should be deposited now at 10% compounded semiannually to make possible withdrawals of $3,000 every 6 months for the next 10 years? Also, what will the total interest be? 7. If you deposit $1,600 into an account paying interest at 8% compounded continuously, how much will be in your account at the end of 12 years?

8. You have purchased $40,000 worth of securities earning 12% compounded semiannually. Ten years from now, you plan to use the securities and interest to establish an account earning 7% compounded annually, and to exhaust this account by equal withdrawals at th e end of each year for five years. How much will each withdrawal be?

9. After your down payment on a new house, you will owe $120,000. You agree to pay off this balance in equal monthly payments for the next 25 years. If interest is 12% compounded monthly, what will be the amount of each monthly payment? How much interest have you paid?

10. You plan to take a world cruise five years from now and you estimate you will need $8,000. You wish to acquire this amount be making equal annual deposits into an account which pays 6% compounded annually. Find the amount of each deposit?

11. How much should be deposited now at 8% compounded semiannually to make possible equal withdrawals of $5,000 at the end of each year for six years, the first withdrawal to be made 10 years from now? Assume an ordinary annuity for the withdrawal period with interest to be 7% compounded annually.

12. Nine years from now, you wish to have an amount available to deposit to an account that will earn 6% compounded annually. This account is to provide you with an income of $10,000 at the end of each year for 11 years. T accomplish this, you invest in a nine year certificate of deposit that pays 8% compounded quarterly, and you will use this certificate plus its interest to es tablish your income account. What should the principal value of the certificate be?

13. On the day of their son’s birth, Mr. and Mrs. Su decided to set aside a sum of money to provide for his college education. They wish to make a single deposit in a bank that pays 9% compounded annually in order to provide a payment of $12,999 on each of the son’s 18 th , 19 th , 20 th , 21 st birthdays. How much should they deposit?

14. During a three year period when your income was high you were able to deposit $120 0 at the end of each month in an account earning 12% compounded monthly. Your income went down and you could not continue the deposits. Moreover, the interest rate on your accumulated deposits fell to 8% compounded quarterly and remained at this rate for 14 years, at which time you decided to exhaust the account by withdrawing equal amounts at the end of every six months for 5 years. The interest rate was 8% compounded semiannually over the time of the withdrawals. How much did you withdraw every six mo nths?

15. If $100 is deposited every six months for four years at 4 percent, compounded semiannually, what will be the accumulated amount after the last deposit?

16. What periodic payment would be required to amortize a $1000 debt in eight semiannual payments of interest is 6 percent, compounded semiannually?

17. If interest is 8 percent (a) compounded quarterly, (b) compounded continuously To what sum will a deposit of $500 grow in 10 years?

18. What annual payment to a sinking fund is required if $5000 is to be av ailable after the ninth payment? Interest is 7 percent, compounded annually.

19. What sum of money deposited now will grow to $1000 in eight years at 4 percent, compounded semiannually?

20. How much should be deposited now at 5 percent, compounded annually, to make possible withdrawals of $500 per year for the next 10 years?

21. A man borrows $3000 to pay for construction of a garage. He is to repay the debt in equal semiannual installments over the next 10 years. What should be the amount of each payment if inte rest is 10 percent, compounded semiannually?

22. If it is stated that productivity of a manufacturing company, as measured by dollars of output per man - hour worked, has increased 5 percent per year and is presently $8.50 per man - hour, what was the corresponding figure of productivity 10 years ago?

23. A man deposits $200 every quarter at 8 percent, compounded quarterly. How much will he have in his account at the end of 10 years?

24. A man wishes to establish an account from which his son can draw $1500 a year for four years. If the account earns interest at 6 percent, compounded annually, how much should the man deposit in the account?

25. Taxes on a piece of property are $900 per year. If taxes increase 2 percent per year, what will be the tax on the pro perty 40 years from now?

26. A man plans to buy a house five years from now, and he wants to accumulate $3000 for a down payment by depositing equal amount s each quarter in a bank which pays 4 percent, compounded quarterly. What should be the amount of each deposit?

27. Mr. Smith purchases a house at $310,000. He pays $40,000 cash and takes a 10 year mortgage for the remainder at 7 percent compounded monthly. What will his monthly mortgage payment be? How much interest will he pay during the 10 years?

28. Mr. B rown takes out a $30,000, 15 year mortgage, at 8 percent compounded monthly. What will his monthly mortgage payment be? How much interest will he pay during the fifteen years?

29. Det ermine the amount of money you should deposit at the beginning of each month for 15 years to accumulate $20,000 if money earns 4% compounded monthly. Annotations

Answer 1