Time Value of Money
Question 1: Abigail Kolinchak has just graduated from college and was offered a great job. She goes to the dealership to purchase a brand new BMW Z4. The car cost $60,000. She was able to put $10,000 down and is going to borrow the remaining $50,000. The Arizona National Bank will loan her the money for five years with a 6 percent interest rate. What will Abigail's monthly payments be?
Question 2: Dax Collins just received $10,000,000 from winning the lottery. He has decided to spend $1,000,000 immediately and to invest the remaining $9,000,000 for 10 years. If he can get a 12 percent interest rate compounded quarterly, how much will he have at the end of 10 years?
Question 3: Juanita Aullman wants to start her own business when she graduates from college in three years and she needs $150,000 to do so. How much money must she put aside today if she can earn 8 percent compounded semiannually?
Question 4: Kylee Kolinchak is 22 years old and just finished college. She would like to retire at the age of 62. If she put aside $3,600 each year starting today and earned an interest rate of 8 percent, how much money will Kylee have available for retirement?
Question 5: Brent Miller invested $50,000 on July 1, 2014, and in return he received a total of $55,655, which he will collect on July 1, 2015. What is the rate of return on Brent's investment?
Question 6: Kaw Valley Mining is contemplating investing in a coal mine. An investment of $1,500,000 would be made for one year with the following potential outcomes:
|
Rate of Return
|
Probability of Outcome
|
|
125%
|
0.10
|
|
90%
|
0.25
|
|
50%
|
0.45
|
|
(30%)
|
0.20
|
What is the expected rate of return for this investment?