PV Tryout
A $200 deposit today that earns an annual interest rate of 5% is worth how much at the end of two years? Assume all interest received at the end of the first year is reinvested the second year.
$220.50
Given the following cash flows, what is the future value at year six when compounded at an annual interest rate of 8.0%? Year 0 2 4 6 Cash Flow (respectively) $9,000 $7,000 $5,000 $11,000
$40,637.29
Your employer has agreed to place year-end deposits of $1,000, $2,000 and $3,000 into your retirement account. The $1,000 deposit will be one year from today, the $2,000 deposit two years from today, and the $3,000 deposit three years from today. If your account earns 5% per year, how much money will you have in the account at the end of year three when the last deposit is made?
$6,202.50
Andy would like to buy a new car but must complete a two-year commitment to the Peace Corp before he will drive the new car. The current price of the car Andy wants to buy is $32,000, and the dealer expects the price of a similar new car to be $35,000 in two years. If Andy can earn an annual interest rate of 4% on his money, should he buy the car now or wait for two years? Why? Note: Storage costs if Andy purchases the car are $0. Please limit your considerations to the factors offered in the answer choices.
Buy now because if Andy invests the $32,000 today it will only increase in value to $34,611, and this is less than the cost of his desired new car in two years.
Which of the following will result in a future value greater than $100?
PV = $50, r = an annual interest rate of 10%, and n = 8 years. PV = $90, r = an annual interest rate of 14%, and n = 1 year. PV = $75, r = an annual interest rate of 12%, and n = 3 years. ALL OF THE FUTURE VALUES ARE GREER THAN $100
A two-year investment of $300 is made today at an annual interest rate of 4%. Which of the following statements is TRUE?
The FV is $324.48
A two-year investment of $3500 is made today at an annual interest rate of 5.75%. Which of the following statements is TRUE?
The future value would be greater if the interest rate was higher.
An investment of $100 today is worth $116.64 at the end of two years if it earns an annual interest rate of 8%. How much interest is earned in the first year and how much in the second year of this investment?
The interest earned in year one is $8.00 and the interest earned in year two is $8.64.
Your grandmother places $13,000 into an account earning an interest rate of 7% per year. After 5 years the account will be valued at $18,233.17. Which of the following statements is CORRECT?
The principal is $13,000, the time period is 5 years, the future value is $18,233.17, and the interest rate is 7%.
A home improvement firm has quoted a price of $14,700 to fix up Eric's backyard. Five years ago, Eric put $12,500 into a home improvement account that has earned an average of 4.75% per year. Does Eric have enough money in his account to pay for the backyard fix-up?
Yes; Eric has $15,764.50 in his home improvement account.