Russ invests $5,000 in a three-year certificate of deposit (CD) that earns 10% compounded annually. How much money will Russ receive at the end of the three years? ?
A) Calculate the amount by using simple multiplication.
B) Calculate using the future value formula FV = PV (1+i)n
C) Calculate using the TVM table. In all cases show your work
Russ invests $5,000 in a three-year certificate of deposit (CD) that earns 10% compounded annually. How much money will Russ receive at the end of the three years? ?
A) Calculate the amount by using simple multiplication.
B) Calculate using the future value formula FV = PV (1+i)n
C) Calculate using the TVM table. In all cases show your work
Related questions
Kelly Malone plans to have $48 withheld from her monthlypaycheck and deposited in a savings account that earns 12%annually, compounded monthly. If Malone continues with her plan fortwo and one-half years, how much will be accumulated in the accounton the date of the last deposit? (PV of $1,FV of $1, PVA of $1, andFVA of $1) (Use appropriate factor(s) from the tablesprovided. Round FVA factor to 4 decimal places.)
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Starr Company decides to establish a fund that it will use 2years from now to replace an aging production facility. The companywill make a $107,000 initial contribution to the fund and plans tomake quarterly contributions of $55,000 beginning in three months.The fund earns 8%, compounded quarterly. (PV of $1, FV of $1, PVAof $1, and FVA of $1) (Use appropriate factor(s) from thetables provided. Round your "Future Value Factor" to 4 decimalplaces.) |
| What will be the value of the fund 2 years from now?
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Part I:
Solve 4 of the following time value of money problems by filling inthe 4 columns to the right of the description.
Be sure to solve 1 problem from each of the following 4 categorieslisted under Problem Types. I have completed the first row as anexample.
Part II:
Discuss how you may use time value of money concepts in yourpersonal life. For example, saving for college tuition orretirement, paying off a car loan or home mortgage. Give specificdetails as to how you would use these formulas for more effectivedecision making. Create 1 description and fill in the table foryour newly created question.
Problem Types:
1 pv = present value of $1
2 fv = future value of $1
3 PVAo = Present Value of an Ordinary Annuity of$1 (payment at end of period)
4 FVAo = Future Value of an Annuity of $1(payment at end of period)
| Description | Type of Problem | Table | Formula | Answer | |
| 1 | How much money must your rich unclegive you now to finance four years of college, assuming an annualcost of $48,000 and an interest rate of 6% (applied to theprincipal until disbursed)? | Present Value of anordinary Annuity | PVAo | PV = 48,000(3.465) | $166,325.07 |
| 2 | How much interest would you earn ifyou deposited $300 at 6 percent for 27 months? | ||||
| 3 | If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2%, how much will it be worth in fiveyears? | ||||
| 4 | How much interest would you pay toborrow $670 for eight months at 12 percent? | ||||
| 5 | You wish to borrow $18,000 to buy anew auto-mobile. Rate is 8.6% over five years with monthlypayments. Find the monthly payment. | ||||
| 6 | What is the future value of $800 at8 percent after six years? | ||||
| 7 | How much would you have in savingsif you kept $200 on deposit for eight years at 8% compoundedsemiannually? | ||||
| 8 | You choose to invest $50/month in a401(k) that invests in an international stock mutual fund. Assumingan annual rate of return of 9%, how much will this fund worth ifretiring in forty years? | ||||
| 9 | What is the future value of anannual deposit of $230 earning 6 percent for 15years? | ||||
| 10 | If you invest $600/Year in a 401(k)that invests in an international stock mutual fund. Assuming anannual rate of return of 9%, how much will this fund worth ifretiring in forty years? | ||||
| 11 | What amount would you have in aretirement account if you made annual deposits of $375 for 25 yearsearning 12 percent, compounded annually? | ||||
| 12 | What is the present value of $2,200earning 15 percent for eight years? | ||||
| 13 | How much money must you set asideat age 20 to accumulate retirement funds of $100,000 at age 65,assuming a rate of interest of 7%? | ||||
| 14 | To have $6,000 for a childâseducation in 10 years, what amount should a parent deposit in asavings account that earns 12 percent, compoundedquarterly? | ||||
| 15 | If you deposit $2,000 in a 5-yearcertificate of deposit at 5.2% with quarterly compounding, how muchwill it be worth in five years? | ||||
| 16 | What is the present value of awithdrawal of $200 at the end of each year for 14 years with aninterest rate of 7 percent? | ||||
| 17 | How much would you have to depositnow to be able to withdraw $650 at the end of each year for 20years from an account that earns 11 percent? | ||||
| 18 | What would be the annual paymentamount for a $20,000, 10-year loan at 7 percent? |
