1. Calculating the Value of Reduced Spending. If a person spends $15 a week on coffee (assume $750 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent?
2. Calculating the Present Value of Future Cash Flows. A financial company advertises on television that they will pay you $60,000 now in exchange for annual payments of $10,000 that you are expected to receive for a legal settlement over the next 10 years. If you estimate the time value of money at 10 percent, would you accept this offer?
3. Calculating the Potential Future Value of Savings. Tran Lee plans to set aside $2,400 a year for the next six years, earning 4 percent. What would be the future value of this savings amount?
4. Determining a Loan Payment Amount. If you borrow $8,000 with a 5 percent interest rate, to be repaid in five equal yearly payments, what would be the amount of each payment? (Note: Use the present value of an annuity table in the chapter appendix.)