Question 1: Interest First City Bank pays 6% simple interest on its savings account balances, whereas Second City Bank pays 6% interest compounded annually. If you made a $5,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years?
Question 2: Assume the total cost of a college education will be $280,000 when your child enters college in 18 years. You presently have $50,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's college education?
Question 3: You're trying to save to buy a new $170,000 Ferrari. You have $40,000 today that can be invested at your bank. The bank pays 6.2% annual interest on its accounts. How long will it be before you have enough to buy the car?
Question 4: You have just received notification that you have won the $1 million first price in the Centennial Lottery. However, the price will be awarded on your 100th birthday, 80 years from now. What is the present value of your windfall if the appropriate discount rate is 9%?
Question 5: In 1895, the first U.S. Open Gold Championship was held. The winner's prize money was $150. In 2006, the winner's check was $1,170,000. What was the percentage increase in the winner's check over this period? If the winner's prize increases at the same rate, what will it be in 2040?
Question 6: The first comic book featuring Superman was sold in 1938. In 2005, the estimated price for this comic book in good condition was about $485,000. This represented a return of 25.90 % per year. For this to be true, what must the comic book have sol for when new?
Question 7: Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 2003, Sotheby's sold the Edgar Degas bronze sculpture Petite Danseuse de Quartorze Ans at auction for a price of $10,311,500. Unfortunately for the previous owner, he had purchased it in 1999 at a price of $12,377,500. What was his annual rate of return on this sculpture?
Question 8: You have just made your first $2,000 contribution to your individual retirement account. Assuming you earn a 12% interest rate of return and make no additional contributions, what will your account be worth when you retire in 45 years? What if you wait 10 years before contributing?
Question 9: You are scheduled to receive $25,000 in two years. When you receive it, you will invest it for six more years at 7.9% per year. How much will you have in eight years?
Question 10: At 9% interest, how long does it take to double your money? To quadruple it?