Question

1. Julia purchased an investment grade gold coin today for $375,000. She expects it to increase in value at a rate of 4.5% compounded annually for the next 6 years. How much will the coin be worth at the end of the sixth year?

N
I/Y
PV
PMT
FV

                                                                                                  

2. Moon has been investing $2,500 quarterly for the past 10 years in an equity mutual fund. How much is the fund worth now assuming she has earned 8.5% compounded quarterly on her investment?

N
I/Y
PV
PMT
FV

3. Alex wants to give his daughter $75,000 to tour Europe after graduation in 5 years. How much should he invest today at an annual interest rate of 10% to have $75,000 in 5 years?

N
I/Y
PV
PMT
FV

4. Christina invested a sum of money at 8% interest, compounded monthly. She let the sum accumulate interest for 15 years and now has $35,000. What was the initial amount that she invested?

N
I/Y
PV
PMT
FV

5. Sharon wants to have $1,500,000 for her retirement in 28 years. How much should she save annually if she thinks she can earn 8% on her investment?

N
I/Y
PV
PMT
FV

6. Gloria wants to buy a car that costs $20,500. Her dad will loan her the money at 5.75% annual interest as long as she makes monthly payments over the next 10 years. How much will her monthly payment be?

N
I/Y
PV
PMT
FV

7. Austin borrowed $5,000 from his father to purchase a mountain bike. He paid back $6,800 to his father at the end of 4.5 years. What was the average annual compound rate of interest on the loan from his father?

N
I/Y
PV
PMT
FV

8. Jamil wants to double his money in 6 years. What annual rate of return must he find in an investment to reach his goal?

N
I/Y
PV
PMT
FV

9. How many years will it will take $25,000 to grow to $50,000 assuming an annual rate of return of 12%.

N
I/Y
PV
PMT
FV

10. Your mother has $375,000 invested at 9.5%, and she now wants to retire. She wants to withdraw $75,000 at the end of each year. How many years will it take to exhaust her funds (run the account down to zero)?

N
I/Y
PV
PMT
FV

Answer 1

Future Value = Present Value x (1 + i)ⁿ and Present Value = Future Value / (1 + i)ⁿ (Note : All the calculations can be done in MS Excel using the future value or present value formula and entering the values for the parameters given in each question into the formula)

Q. No.	N	I/Y	PV	PMT	FV
1	6	4.5%	$ 375,000	-	= $ 488,347.55
2	10 x 4 = 40	8.5% / 4 = 2.125%	-	$ 2,500	= $ 155,165.18
3	5	10%	= $ 46,569.10	-	$ 75,000 (given)
4	15 x 12 = 180	8% / 12 = 0.6667%	= $ 10,583.86	-	$ 35,000 (given)

   5. Future value of an annuity = A x [(1 + i)ⁿ - 1] / i

   Future value is given = $ 1,500,000

   1,500,000 = A x (1 + 0.08)²⁸ - 1 / 0.08 = A x [(8.63 - 1) / 0.08] = A x 95.375

A = 1,500,000 / 95.375 = $ 15,727.39 is the amount to be saved annually by Sharon