- Compare the interest earned by $1,000 for five years at 8% simple interest with that earned by the same amount for five years at 8% compounded annually.
- You are about to borrow $10,000 from a bank at an interest rate of 9% compounded annually. You are required to make five equal annual repayments in the amount of $2,571 per year, with the first repayment occurring at the end of year 1. Show the interest payment and principal payment in each year.
- Suppose you have the alternative of receiving either $12,000 at the end of five years or P dollars today. Currently you have no need for money, so you would deposit the P dollars in a bank that pays 5% interest. What value of P would make you indifferent in your choice between P dollars today and the promise of $12,000 at the end of five years?
- You bought 5,000 shares of Company As stock at $28 a share. Your intention is to hold the stock until your investment doubles in value. If you project 12% annual growth for the value of Company As stock, how many years do you expect to hold it to reach your goal? How long for it to triple in value?
- What annual deposit is required for 5 years to accumulate an amount of money with the same purchasing power as $680.58 today, if the market interest rate is 10% per year and inflation is 8% per year?
- Four annual deposits of $2,000, $1,600, $1,200, and $800 are made into a fund that pays in- terest at a rate of 11% compounded annually. Determine the amount in the fund immediately following the 4th deposit.
- What is the equal payment series for 12 years that is equivalent to a payment series of $15,000 at the end of the first year, decreasing by $1,000 each year over 12 years? Interest is 8% compounded annually.
- A city engineer has estimated the annual toll revenues from a newly proposed highway con- struction over 20 years as follows: An = ($2, 000, 000)(n)(1.06)n−1 n = 1,2,...,20 To validate the bond, the engineer was asked to present the estimated total present value of toll revenue at an interest rate of 6%. Assuming annual compounding, find the present value of the estimated toll revenue.
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