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Problem:

1. If you deposit $25,000 in an account that pays 9% interest annually, how much will be in your account after 18 years?

2. What is the present value of $40,000 in 8 years if the interest rate is 8% annually?

3. You parents will retire in 20 years. They currently have $50,000, and they think they will need $500,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don't save any additional funds?

4. What is the future value of a 7%, 15-year ordinary annuity that pays $20,000 each year? If this was an annuity due, what would its future value be?

5. What is the present value of a 9%, 12-year ordinary annuity that pays $40,000 each year? If this was an annuity due, what would its present value be?

6. An investment will pay $500 at the end of the first year, $600 at the end of the second year, and $700 at the end of years 3 and 4. If other investments of equal risk earn 9 percent annually, what is its present value?

7. You want to buy a car and have to finance $20,000. The loan will be fully amortized over 5 years and the nominal interest rate will be 6% with interest and payments paid monthly. What will be the monthly loan payment?

8. When you apply for a credit card, you read that the annual interest rate is 22%. However, the fine print at the bottom of your monthly statement says that the interest compounds daily. What is the effective interest rate (the real rate you are paying)?

Show your all work and describe in detail.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91145984

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