TVM ANNUITIES

# TVM ANNUITIES - to own his new car 7 Derik plans to retire...

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1. The average cost of a wedding is \$20,000 today. What will the cost of a wedding be in 5 years if prices increase at a rate of 4% due to inflation. 2. Today Sally has \$20,000 in savings for her wedding which is 5 years away. She has it in an account earning 8%. How much will she have in savings for her wedding in 5 years? 3. Joe has \$1,000 in a savings account earning 12% annually . Interest is compounded monthly. How much will Joe have in his savings account in 3 years? 4. Jeff just inherited \$40,000. If he invests it in a Mutual Fund with an APR of 12%, compounded quarterly , how much will he have in 2 years? 5. Sue wants to have \$1 million dollars when she retires in 20 years. She found a savings account which is currently paying 10% annually, how large of a one time deposit will she need to deposit to have \$1 million dollars in 20 years?

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6. Alex wants \$50,000 for a new car in 5 years. If his account is earning 12% APR , compounded monthly , how much does he need to deposit (*today goes unsaid
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Unformatted text preview: ) to own his new car? 7. Derik plans to retire in 10 years. He needs \$500,000 at retirement. His account earns 12% APR, compounded semi-annually. How much does he need to have today to retire in 10 years? 8. This year, Amber began investing \$100 a year in a savings club earning 5% annually. How much will she have in the club in 15 years? 9. Bob just won the lottery. He is due to receive \$10,000 per year for the next 25 years. However, he has chosen to take a lump sum payment instead. The discount rate associated with the lottery is 5%. If Bob puts this lump sum settlement in an account earning 7% APR, compounded quarterly , how much will he have at the end of 25 years? *hint: this is a two part question. One bringing the PVA back from the future; Part 2 taking a lump sum back to the future. 10. What is the present value of a 10-year \$1,000 annuity discounted back to the present at 5%?...
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TVM ANNUITIES - to own his new car 7 Derik plans to retire...

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