FIN 1115 01---Personal Finance Question # 5
On the day you are born your mom puts $100 into an investment account for you. If it earns 8% interest how much money will you have when you turn 65 and decide to retire? Select one: a. A lot of money b. $399.60 c. $184,724.81 d. $14,877.98
$14,877.98 N = 65 I/Y = 8 PV = -100 (negative because it is a deposit) PMT = 0 FV = ?
Suppose that at birth your mom and dad deposited $5,000 into an account that earned 6% annually. How much money would you have on your 21st birthday? Select one: a. $16,997.82 b. $199,963.63 c. $5,063.38 d. $14,271.70
$16,997.82 N = 21 I/Y = 6 PV = -5,000 (remember that it is a deposit so it is negative) PMT = 0 FV = ? (this is what you solved) or: FV = PV(1 + .06)21
If I need to calculate the monthly payment for my loan all I need to do is calculate the annual payment and then divide by 12. Select one: True False
False
You are buying a car. You will take a $10,000 loan that will be paid monthly for 4 years at 6% annual interest. What will be your monthly car payment? Select one: a. $240.49 b. $234.85 c. $208.33 d. $2,885.91
$234.85 N = 48 (4 years x 12 months) I/Y = 6 / 12 = 0.5 (if using BA II Plus or keep at 6 but change compounding to monthly if using the App) PV = 10,000 PMT = ? FV = 0 (you pay the loan down to $0)
Mom and dad decided when you were born that they would deposit $1,000 each year on your birthday into an account earning 5% every year. How much money would you have on your 18th birthday? Select one: a.$28,132.38 b.$11,689.59 c. $18,076.70 d. $2,406.62
$28,132.38 N = 18 I/Y = 5 PV = 0 (you start with nothing) PMT = -1,000 (negative because it is being deposited) FV = ? (what you are calculating) or: FVA = 1,000 {[(1 + .05)18 - 1] / .05}
Same as previous question but this time the 1st deposit is made at birth. (deposits made at the beginning of the year) Mom and dad decided when you were born that they would deposit $1,000 into an account earning 5% every year on your birthday. How much money would you have on your 18th birthday? Select one: a. $28,132.38 b. $18,000 c. $43,319.15 d. $29,539.00
$29,539.00 N = 18 I/Y = 5 PV = 0 PMT = -1,000 FV = ? or: With the calculator in end mode you take your answer from the previous question and multiply by one more period of interest. $28,413.38 (1 + .05) = $29,539.00
You are inspired by this class. You decide that you will begin to save $1,000 per year for the next 45 years. You believe you can earn 8% annually on these investments. How much total money would you have 45 years from now? Select one: a. $250,146.54 b. $1,847,248.08 c. $386,505.62 d. $31,920.45
$386,505.62 N = 45 I/Y = 8 PV = 0 PMT = -1,000 FV = ?
You want to have $250,000 when you turn 65. How much money do you need to deposit into an account earning 8% on your 20th birthday? Select one: a. $8,458.53 b. $646.82 c. $7,831.97 d. $241,163.54
$7,831.97 N = 45 I/Y = 8 PV = ? (this is what you are calculating) PMT = 0 FV = $250,000 or: PV = 250,000 / (1 + .08)45
You want to retire at age 60 with an income stream of $50,000 for the next 30 years. You think that you will earn a 5% return on your money. How much money will you need to save before you retire? Select one: a.$946,464.48 b. $768,622.55 c. $782,464.38 d. $3,321,942.38
$768,622.55 N = 30 (number of years of income streams) I/Y = 5 PV = ? (this is what you are calculating - the amount required at the beginning point of the income streams) PMT = 50,000 (positive because you are receiving it) FV = Assumption is that you will spend until your money is gone or: PVA = 50,000 ({ 1 - [1 / (1 + .05)30 ]} / .05)
You want your child to have money for college. How much must you deposit on the day your child is born so that you can have $20,000 on their 18th birthday if your account earns 4% annually? Select one: a. $779.87 b. $9,872.56 c. $19,856.55 d. $5,000
$9,872.56 N = 18 I/Y = 4 PV = ? PMT = 0 FV = 20,000