TVMAnnotatedProblems

# TVMAnnotatedProblems - CHAPTER2 TimeValueofMoney \$100,000to...

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CHAPTER 2 Time Value of Money Annotated Problem Slides

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If a parent wants to have \$100,000 to  send a child to college, how much must  be invested annually for 18 years if the  interest rate is 9%?
N = 18 I = 9 PV = 0 PMT = ? FV = 100000 CPT PMT = -2421.22

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Year Return 1998 \$50 1999 \$60 2000 \$75 What are the yearly returns from this investment?   What  is the compounded annual return from 1998-2000?
N = 2 I = ? PV = -50 PMT = 0 FV = 75 CPT I = 22.5

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A saver places \$1,000 in a certificate of  deposit that matures after 10 years and  pays 7% interest, which is compounded  annually until the certificate matures.   How much interest will the saver earn if  the interest is left to accumulate?
N = 10 I = 7 PV = -1000 PMT = 0 FV = ? CPT FV = 1967 Simple interest = 0.07 x 1000 = 70 x 10 years = \$700 Total interest = 1967 – 1000 (principal) = 967 Compound interest = 967 – 700 = \$267

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A self-employed person deposits \$1,500  annually in a retirement account that earns  8%.  How much will be in the account when  the individual retires at age 65 if the savings  program starts when the person is age 45?   How much additional money will be in the  account if the saver defers retirement until  age 70? How much additional money will be  in the account if the saver discontinues the  contributions but does not retire until age 70?
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## This note was uploaded on 03/02/2011 for the course BMGT 340 taught by Professor White during the Spring '08 term at Maryland.

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TVMAnnotatedProblems - CHAPTER2 TimeValueofMoney \$100,000to...

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