Question 1

After placing $8,000 in a savings account paying annual compound interest of 7%, calculate the amount that will accumulate if it is left for 10 years?

Question 2

After placing $13,000 in a savings account paying annual compound interest of 4%, Leona will accumulate what amount if she leaves the money in the bank for 3 years?

Question 3

What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?

Question 4

Alex Karez has taken out a loan of $180,000 with an annual rate of 11% compounded monthly to pay off hospital bills from his wife Izzy's illness. If the most Alex can afford to pay is $3,500 a month, how long will it take to pay off the loan? How long will it take to pay off the loan if he can pay $4000 each month? Use five decimal places for the monthly percentage rate in your calculations. If Alex can pay $3,500 a month, how many years will it take to pay off the loan?

Question 5

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:

                                                     Investment

End of Year                    A                              B                          C

1                                   $ 1,000                     $1,000                  $ 5,000

2                                      2,000                       1,000                      5,000

3                                      3,000                       1,000                      (5,000)

4                                      (4,000)                    1,000                      (5,000)

5                                      4,000                       3,000                     15,000 

What is the present value of each if these three investments if the appropriate discount rate is 13%?