Exercise - Time Value of Money

Exercise –Time Value of Money
1. Robin invests $5,000 at 12% interest compound annually. How much will he have after 5 years?
(8,811.50)
2. Sara wants to have $300,000, 15 years from now. How much should she invest now if she
supposes to receive an interest rate of 18% per year? (25,050)
3. You lend $10,000 to Mr. White Young, who agrees to pay you installment every month for 10
months. If interest rate is 12% compound monthly, how much should he pay per month?
(1,055.82)
4. If you save $2,500 at the end of each year for 4 years at 8% interest compound annually, how
much would you have at the end of the entire period? (11,265.25)
5. If you plan to withdraw $10,000 at the end of each year for 5 years discounted at 16% compound
annually, how much do you need to have in your saving account now? (32,743)
6. How much is each monthly deposit in a saving account for 5 years at an annual interest rate of
24% compound monthly in order to accumulate $1,000,000? (8,767.97)
7. Find a present value of an eight-year annuity loan of $5,000 if the first payment is to be received
in the third year discounted at 7.25% per annum. (25,706.78)
8. You plan to deposit $400 at the end of each year for 2 years,
$200 at the end of next year,
$300 at the end of each year for the next 3 years, and
$100 at the end of each year for the last 2 years.
How much will you have over the entire period if your savings account awards 4% per year?
(2,492.72)
9. How much do you need to save in a bank presently if you would like to make the following
withdrawals at the end of each period? (Apply 8% of interest rate) (2,019.28)
100 300 300 500 500 500 700

|---------|---------|---------|---------|---------|---------|---------|
0 1 2 3 4 5 6 7
10. Your friend borrows $250,000 from you. According to the agreement, he has to pay $35,000
annually for the first 3 years. How much is the annual payment for the remaining portion of 4
years if an interest rate is 13% for the first 3 years and 15% for the remaining periods?
(84,575.48)
11. Sandy is planning to retire. Her goal is to set aside the same amount of money each year into a
saving account until she retires so that she can withdraw $70,000 each year during her
retirement. She expects to retire in forty years and expects to live for ten years after the
retirement. She expects to earn an annual interest of 5 percent on her account balance. Calculate
the amount of the deposit Sandy must make for her plan if her first deposit will be one year
from today and her last deposit will be forty years from today. She intends to make her first
withdrawal forty-one years from today. (4,474.50)
12. Mark has $2,000,000 in a saving account awards 8 percent compound annually. He plans to
withdraw money for the investments as his schedule below.
$700,000 $1,000,000
|--------|--------|--------|--------|--------|
0 1 2 3 4 5
• He invests $700,000 in Company A as a 4-year investment. A return on investment (ROI)
from Co. A is 18% per year.
• Another $1,000,000 will be invested in Company B for 2 years with a 20% rate of return per
year.
• All returns on investment will be deposited back in his saving account.
How much will he have in his saving account at the end of year five? (3,649,441.10)
13. You gave loan of $100,000 to your friend for which your friend will repay $179,080 at the end
of year 10. What is the interest rate you are charging your friend? (6%)
14. James and Helen Turnip are saving to buy a car at the end of year 4, assuming that the car will
cost $550,000. They can earn 12 percent a year on their savings, how much do they need to
put aside at the end of each year from year 1 through year 4 in order to buy this car?
(115,079.61)
15. A townhouse costs $1,000,000. 15% of the price is required as a down payment today. 85% of
the price is financed at an interest rate of 12% annually with 30 equal payments beginning one
year from now. What is the size of the annual loan payment? (105,521.90)
***** The End *****

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