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Ch_05_Inclass_Exercise_Solutions

Ch_05_Inclass_Exercise_Solutions - 2 7 Suppose you need...

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1 Ch 05 Inclass Exercise Solutions Using a calculator 1. Suppose you invest $2,000 for 1 year compounded at 4% per year. What is the future value? FV = 2000 (1+.04)^1 = 2080 2. Suppose you invest $2,000 for 2 years compounded at 4% per year. What is the future value? FV = 2000 (1+.04)^2 = 2163.20 3. Suppose you invest $3,000 today at 5% simple interest. How much will you have in 15 years? FV = 3000[1+(.05)(15)] = 5250 Using a spreadsheet 4. Suppose you invest $4,000 for 14 years at 4% per year. What is the future value? Future Value - Compounding PV 4,000.00 t 14 r 4.00% FV 6,926.71 5. Suppose you invest $12,000 for 30 years at 5% per year. What is the future value? PV 12,000.00 t 30 r 5.00% FV 51,863.31 Future Value - Compounding 6. Suppose you will receive $140,000 in 25 years at 4% per year. What is the present value? FV 140,000.00 t 25 r 4.00% PV 52,516.35 Present Value - Discounting
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Unformatted text preview: 2 7. Suppose you need $40,000 in 10 years and can earn 4% per year. How much do you need to invest today as a lump sum? Present Value - Discounting FV 40,000.00 t 10 r 4.00% PV 27,022.57 8. You need $30,000 and can earn 6%. You currently have $5,000. How many years until you will have the amount you need? Number of Periods FV 30,000.00 PV 5,000.00 r 6.00% t 30.75 9. A relative invested $5,000 40 years ago and just left you the account worth $100,000. What compounded rate did your relative earn? Rate of Return FV 100,000.00 PV 5,000.00 t 40 r 7.78% 10. You want to begin saving for your daughter’s college education and you estimate that she will need $150,000 in 17 years. If you feel confident that you can earn 8% per year, how much do you need to invest today? Present Value - Discounting FV 150,000.00 t 17 r 8.00% PV 40,540.34...
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