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Use the time value tables distributed in class or in your text to solve the following financial planning
problems.
These problems can also be solved using a financial calculator or computer programs; however,
the answers may vary by a few dollars due to rounding.
In answering these problems, assume that interest is
compounded annually and that all payments are made/received at the end of the year.
1.
Jack and Becky Smith inherited $10,000.
Assuming they save this money and it earns 8% a year, how
much will be available in 20 years?
2.
The Jones’ twin daughters will be old enough to enter college in 15 years.
They would like to have
$80,000 available at that time to help with the girls' college educations.
What lump sum amount would
they need to deposit now in an account earning 5% a year in order to have $80,000 in 15 years?
What lump sum amount would they need to deposit now in an account earning 8% a year in order to have
$80,000 in 15 years?
3.
But the Joneses don't have a lump sum of money to deposit for the twins' college education.
They have
decided to make an annual contribution to savings to accumulate the needed $80,000.
How much will
they need to deposit each year in an account earning 5% a year in order to have $80,000 in 15 years?
How much would they need to deposit each year in an account earning 8% a year in order to have
$80,000 in 15 years?
4.
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This note was uploaded on 11/10/2010 for the course HDF 322 taught by Professor Kitt during the Fall '08 term at University of Texas at Austin.
 Fall '08
 KITT

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