1. You deposited $200 in Bank of America back in year 2007, and the account balance became $250 in 2018 when you withdrew it. Which one is present value? Which one is future value?
2. What is the future value of $3,000 invested today for 3 years at 12 percent APR compounded annually? What is the future value if the 12 percent APR is compounded monthly?
3. You want to have $80,000 ready for your daughter’s education 18 years from now. If you can earn 12 percent APR, compounded monthly, on your savings, how much do you need to deposit today to reach your goal?
4. You need $250,000 in cash to buy a house 8 years from today. You expect to earn 8 percent APR, compounded quarterly on your savings. How much do you need to deposit today for this purpose?
5. In 1934, your great grandfather deposited $50 in First USA bank at 5% compounding annually. How much could you withdraw from the bank in year 2018 (assume no withdraw made in between)? If your great grandfather wanted you to have $10,000 in year 2018, how much would he deposit in 1934 to achieve the goal?
6. Chase bank offers a C.D. account with 5% APR compounded annually. How long does it take to double your deposit (assume any amount to start with) if you choose this account?
7. TD bank offers a similar C.D. account with 5% APR compounded daily. How long does it take to double you deposit? Compare your answer to Question 6.
8. If you want to double your deposit in 10 years, what would be the interest rate (APR) if we assume semi-annual compounding?
9. Lisa just deposited $5,000 into an account at Bank of America, where she will earn 4.8% (APR) compounded annually on this money. If she wants to have a balance of $8,000, how many years will she have to wait? What would be your answer if the 4.8% (APR) is compounded monthly?
10. “Mona Lisa” by Leonardo da Vinci was priced $50,000 in 1940 and $400,000 in 1965, respectively. If you were the owner of it, what is the rate of return (APR) on your investment if we assume annual compounding? What about semi-annual compounding?