Question 1
After placing $8,000 in a savings account paying annual compound interest of 7%, calculate the amount that will accumulate if it is left for 10 years?
Question 2
After placing $13,000 in a savings account paying annual compound interest of 4%, Leona will accumulate what amount if she leaves the money in the bank for 3 years?
Question 3
What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?
Question 4
Alex Karez has taken out a loan of $180,000 with an annual rate of 11% compounded monthly to pay off hospital bills from his wife Izzy's illness. If the most Alex can afford to pay is $3,500 a month, how long will it take to pay off the loan? How long will it take to pay off the loan if he can pay $4000 each month? Use five decimal places for the monthly percentage rate in your calculations. If Alex can pay $3,500 a month, how many years will it take to pay off the loan?
Question 5
You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
Investment
End of Year A B C
1 $ 1,000 $1,000 $ 5,000
2 2,000 1,000 5,000
3 3,000 1,000 (5,000)
4 (4,000) 1,000 (5,000)
5 4,000 3,000 15,000
What is the present value of each if these three investments if the appropriate discount rate is 13%?