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future value

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You just received a bonus of 1,000.

a.  Calculate the future value of 1,000​, given that it will be held in the bank for 9 years and earn an annual interest rate of 8 percent.

b.  Recalculate part ​(a​) using a compounding period that is​ (1) semiannual and​ (2) bimonthly.

c.  Recalculate parts ​(a​) and ​(b​) using an annual interest rate of 116 percent.

d.  Recalculate part ​(a​) using a time horizon of 18 years at an annual interest rate of 8 percent.

e.  What conclusions can you draw when you compare the answers in parts ​(c​) and ​(d​) with the answers in parts ​(a​) and ​(b​)?

a.  What is the future value of ​$1,000 in a bank account for 9 years at an annual interest rate of 8 ​percent?

​$___​(Round to the nearest​ cent.)

 
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child’s education

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To pay for your​ child’s education, you wish to have accumulated ​13,000 at the end of 8 years. To do​ this, you plan to deposit an equal amount into the bank at the end of each year. If the bank is willing to pay 15 percent compounded​ annually, how much must you deposit each year to obtain your​ goal?

The amount of money you must deposit each year in order to obtain your goal is ​$____ ​ (Round to the nearest​ cent.)

 
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annual payments

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On December​ 31, Beth Klemkosky bought a yacht for ​$50,000. She paid ​$12,000 down and agreed to pay the balance in 12 equal annual installments that include both the principal and 13 percent interest on the declining balance. How big will the annual payments​ be?

a.  On December​ 31, Beth Klemkosky bought a yacht for ​$50,000 and paid ​$12,000 ​down, how much does she need to borrow to purchase the​ yacht?

 
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The state​ lottery’s million-dollar payout

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The state​ lottery’s million-dollar payout provides for ​$1.2 million to be paid in 25 installments of ​$48,000 per payment. The first ​$48,000 payment is made​ immediately, and the 24 remaining ​$48,000 payments occur at the end of each of the next 24 years. If 6 percent is the discount​ rate, what is the present value of this stream of cash​ flows? If 12 percent is the discount​ rate, what is the present value of the cash​ flows?

a.  If 6 percent is the discount​ rate, the present value of the annuity due is ​$___. ​(Round to the nearest​ cent.)

 
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