chapter 4

You want to have $40,000 for a down payment on a house 4 years from now. If you can earn 5.6 percent, compounded annually on your savings, how much do you need to deposit today to reach your goal?

$32,166.54

Starlite Industries will need $2.2 million 4.5 years from now to replace some equipment. Currently, the firm has some extra cash and would like to establish a savings account for this purpose. The account pays 3.6 percent interest, compounded annually. How much money must the company deposit today to fully fund the equipment purchase?

$1,876,306.49

How long will it take to double your savings if you earn 6.4 percent interest, compounded annually?

11.17 years

Your coin collection contains ten 1949 silver dollars. If your grandparents purchased the coins for their face value when they were new, how much will your collection be worth when you retire in 2065, assuming the coins appreciate at an annual rate of 5.1 percent?

$3,205.64

Your grandparents just gave you a gift of $6,500. You are investing this money for 6 years at 4 percent simple interest. How much money will you have at the end of the 6 years?

$8,060

You have been told that you need $32,000 today for each $100,000 you want when you retire 28 years from now. What rate of interest was used in the present value computation? Assume interest is compounded annually.

4.15 percent

Suppose that in 2015, a $10 silver certificate from 1898 sold for $11,700. For this to have been true, what would the annual increase in the value of the certificate have been?

6.22 percent

Jenny needs to borrow $5,500 for four years. The loan will be repaid in one lump sum at the end of the loan term. Which one of the following interest rates is best for Jenny?

6.5 percent simple interest

Computing the present value of a future cash flow to determine what that cash flow is worth today is called:

discounted cash flow valuation.

The relationship between the present value and the investment time period is best described as:

inverse