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Time Value Problems

# Time Value Problems - TIME VALUE PROBLEMS Use the time...

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TIME VALUE PROBLEMS 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?

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