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TVMSolutions

# TVMSolutions - Time Value of Money Problems 1 If a father...

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Time Value of Money Problems 1. If a father wants to have \$100,000 to send a child to college, how much must he invest annually for 18 years if he earns 9% on his funds? N: 18 PV: 0 FV: 100,000 I: 9% Solve for PMT = \$2,421.22 2. Year Return 1998 \$50 1999 \$60 2000 \$75 What are the yearly returns from this investment? What is the compounded annual return from 1998 to 2000? 1998-9 return: 60-50/50 = 20% 2 year annually compounded return” PV: -50 FV: 75 N: 2 PMT: 0 Solve for I = 22.5% 3. 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 PV: 1,000 PMT: 0 I: 7% Solve for FV: 1,967 4. 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?

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TVMSolutions - Time Value of Money Problems 1 If a father...

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