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    Business Finance Problems Chapter 7 Mixed

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    jaypdemarco
    1. The employee wants to know how much will be in their 401k account after contributing $1,000 annually earning 6% interest from age 45 to retirement at age 65. 2. The employer wants to know how much they must initially deposit into an account earning 6% interest to make annual $1,000 payments for 20 years and then have the account be depleted. 3. You bought a stock for $10 and expect its price to increase 9% annually for 10 years. You want to know the anticipated sale price. 4. You want to know the original cost of a stock that was sold for $23.67 after being held for 10 years and earning a 9% return.

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    Business Finance Problems Chapter 7 Mixed

    Uploaded by

    jaypdemarco
    9 views2 pages
    1. The employee wants to know how much will be in their 401k account after contributing $1,000 annually earning 6% interest from age 45 to retirement at age 65. 2. The employer wants to know how much they must initially deposit into an account earning 6% interest to make annual $1,000 payments for 20 years and then have the account be depleted. 3. You bought a stock for $10 and expect its price to increase 9% annually for 10 years. You want to know the anticipated sale price. 4. You want to know the original cost of a stock that was sold for $23.67 after being held for 10 years and earning a 9% return.

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    Business_Finance_Problems_Chapter_7_mixed

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    1. The employee wants to know how much will be in their 401k account after contributing $1,000 annually earning 6% interest from age 45 to retirement at age 65. 2. The employer wants to know how much they must initially deposit into an account earning 6% interest to make annual $1,000 payments for 20 years and then have the account be depleted. 3. You bought a stock for $10 and expect its price to increase 9% annually for 10 years. You want to know the anticipated sale price. 4. You want to know the original cost of a stock that was sold for $23.67 after being held for 10 years and earning a 9% return.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    9 views2 pages

    Business Finance Problems Chapter 7 Mixed

    Uploaded by

    jaypdemarco
    1. The employee wants to know how much will be in their 401k account after contributing $1,000 annually earning 6% interest from age 45 to retirement at age 65. 2. The employer wants to know how much they must initially deposit into an account earning 6% interest to make annual $1,000 payments for 20 years and then have the account be depleted. 3. You bought a stock for $10 and expect its price to increase 9% annually for 10 years. You want to know the anticipated sale price. 4. You want to know the original cost of a stock that was sold for $23.67 after being held for 10 years and earning a 9% return.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    1.

    An employer offers to start a pension plan like a 401(k) for a 45-year-old


    employee. The plan is to place $1,000 at the end of each year in an account that
    earns 6 percent annually. The employee wants to know how much will be in the
    account by retirement at age 65.

    2. The same employer decides to place a lump sum in an account that earns 6
    percent and to draw on the account to make the annual payments of $1, 000.
    After 20 years all the funds in the account will be depleted. How much must be
    deposited initially in the account?

    3. You buy a stock for $10 and expect its price to increase 9% annually. After 10
    years, you plan to sell the stock. What is your anticipated sale price?

    4. You sell stock for $23.67 that was held for 10 years. You earned a return of 9%.
    What was the original cost of the stock?

    5. You bought a stock for $10 held it for 10 years and then sold it for $23.67. What
    was the return on this investment?

    6. An investment pays $50 per year for 10 years. If you can earn 6% how much is
    this investment worth?

    7. An investment pays $1,000 after 10 years. If you can earn 6% how much is this
    investment worth?

    8. An investment pays $50 per year for 10 years after which $1,000 is returned to
    the investor. If you can earn 6% how much is this investment worth?

    9. You purchase a home for $100,000 make a down payment of $20,000 and
    borrow the balance $80,000. The mortgage loan is for 25 years and the rate of
    interest is 8%. What is the annual payment required by this loan?

    10. Your 85 year old Aunt Bea has to enter a nursing home that charges $96,000 a
    year. You have power of attorney and sell her home for $470,000. Excluding any
    other sources of income and any other expenses how long will her money last if
    you are able to earn 8% annually?
    11. A firm has only $10,000 to invest and must choose between two projects.
    Project A returns $12,400 after a year while project B pays $15,609 after three
    years. If management wants to select the investment with the higher return,
    which alternative should be chosen?

    12. How much additional interest will you earn on $1,000 at 10 percent for 10 years if
    interest is compounded semi-annually instead of annually?

    13. An apartment will generate $12,000 a year for 5 years, after which you expect to
    sell the property for $100,000. What is the maximum you should pay for the
    property if your cost of money is 10%?

    14. Your mother is planning to retire this year. Her firm has offered her a lump sum
    retirement payment of $75,000 or a $8,000 lifetime ordinary annuity-whichever
    she chooses. Your mother is in reasonably good health and expects to live for at
    least 20 more years. Which option should she choose, assuming that an 6
    percent annual interest rate is appropriate to evaluate the annuity?

    15. You invest $5,000 in the bank for 10 years and it pays 7% interest, which is
    compounded annually.
     How much interest will you earn if the investment is an ordinary annuity?
     How much interest will you earn if the investment is an annuity due?
     Why are the answers different?

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