Exam 5: Time Value of Money 2: Analyzing Annuity Cash Flows

If you start making $90 monthly contributions today and continue them for ten years,what is their future value if the compounding rate is 6 percent APR? What is the present value of this annuity?

A car company is offering a choice of deals.You can receive $4,000 cash back on the purchase,or a 0 percent APR,4-year loan.The price of the car is $40,000 and you could obtain a 4-year loan from your credit union,at 6 percent APR.Which deal is cheaper?

If the future value of an ordinary,11-year annuity is $5,575 and interest rates are 5.5 percent,what is the future value of the same annuity due?

You wish to buy a $20,000 car.The dealer offers you a 5-year loan with an 8 percent APR.What are the monthly payments?

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent?

A local furniture store is advertising a deal in which you buy a $3,500 living room set with three years before you need to make payments (no interest is incurred).How much money would you have to deposit now in a savings account earning 3.5 percent APR,compounded monthly,to pay the $3,500 bill in three years?

As a college student,you probably receive many credit card offers in the mail.Consider these two offers.The first card charges a 17 percent APR.An examination of the footnotes reveals that this card compounds monthly.The second credit card charges 16.25 percent APR and compounds weekly.What is the effective annual rate of the cheaper card?

Jane has been saving $200 in her retirement account each month for the last 20 years and plans to continue contributing $200 each month for the next 20 years.Her account has been earning an 8 percent annual interest rate and she expects to earn the same rate for the next 20 years.Her twin brother,Hal,has not saved anything for the last 20 years.Due to sibling rivalry,he wants to have as much as Jane is expected to have at the end of 20 years.If Hal expects to earn the same annual interest rate as Jane,how much must Hal save each month to achieve his goal?

Monica has decided that she wants to build enough retirement wealth that,if invested at 7 percent per year,will provide her with $3,000 monthly income for 30 years.To date,she has saved nothing,but she still has 20 years until she retires.How much money does she need to contribute per month to reach her goal?

What is the future value of a $500 annuity payment over eight years if interest rates are 14 percent?

What is the present value,when interest rates are 6.5 percent,of a $100 payment made every year forever?

A small business owner visits his bank to ask for a loan.The owner states that she can repay a loan at $2,500 per month for the next two years and then $3,000 per month for another two years after that.If the bank is charging customers 6.5 percent APR,how much would it be willing to lend the business owner?

Your firm needs to buy additional physical therapy equipment that costs $27,000.The equipment manufacturer will give you the equipment now if you will pay $7,000 per year for the next five years.Assume your firm can borrow at a 13 percent interest rate.You need to analyze if your firm should pay the manufacturer the $27,000 now or accept the five-year annuity offer of $7,000.Which of the following statements is correct?

Bank A charges a 7.50 percent annual percentage rate and interest is due at the end of the year.Bank B charges a 6.95 percent annual percentage rate and interest must be paid monthly.What is the effective annual rate charged by each bank?

You wish to buy a $30,000 car.The dealer offers you a 5-year loan with a 9 percent APR.What are the monthly payments? What is the monthly payment if you paid interest only?

Your company borrows $275,000 today to fund its growth initiatives.It must repay the bank in five annual payments of $76,300 at the end of each year.What annual interest rate is your firm paying?

What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent?

If you start making $25 monthly contributions today and continue them for four years,what is their future value if the compounding rate is 6 percent APR? What is the present value of this annuity?

Bethany purchased a $35,000 car three years ago using a 6 percent,5-year loan.She has decided that she would sell the car now,if she could get a price that would pay off the balance of her loan.What is the minimum price Bethany would need to receive for her car?

What is the future value of a $1,000 annuity payment over 4 years if the interest rates are 8 percent?