Exam 3: Understanding and Appreciating the Time Value of Money

Suppose that you place $450 in a bank account each year for the next 20 years.How much would be in your bank account at the end of the twentieth year if the deposits earned an annual rate of return of 6% each year?

The I/Y key on a financial calculator stores the information for the interest rate or the discount rate per period.

Sly's Used Cars just sold you a clunker (you need it to get to class on time).You financed the $4,728.48 purchase price for 24 months.They said your payment would be $250.What interest rate did they charge you (assume monthly compounding)?

What is the present value of an annual payment of $1,500 discounted back 15 years at an annual rate of return of 3%?

Your money will grow or compound ________ as the number of compounding periods per year becomes ________.

It is now five years later,and Adrian has saved enough money for a 20 percent down payment on a house.He will have to borrow $135,000 in a 30-year loan with an annual interest rate of 6 percent compounded monthly.What will his monthly mortgage payment be?

Your great-aunt wants to help with your college graduation party.She has just placed $5,000 dollars in a bank account that will earn an annual rate of return of 6%.If you graduate in four years,how much will be in your party account?

Alexis want to buy a house in 5 years.She wants to save $75,000 over the next five years for a down payment.If she can earn an annual rate of 9% on her savings,how much must she deposit in equal payments at the end of each month for the next five years to reach her goal?

Your daughter has been saving $500 a year for each of the last 10 years for her "sweet sixteen" party.How much is now in her party account (at the end of the tenth year)if she earned an annual rate of return of 6%?

Suppose that you had deposited $100 in a bank account for each of the last 5 years.What annual interest rate is attached to this account if there is now (at the end of the fifth year)$758.92 in the account?

What is the present value today of $150 that will be received in four years from now if the discount rate is 12%?

Samantha Jee put $3,000 into a mutual fund yielding a 12 percent annual rate of return.Using the Rule of 72,calculate approximately how long it will take for the investment to double in value.

With a mortgage loan of $150,000 at an annual percentage rate of 6% for 30 years,you will pay over $150,000 in interest before your loan ends.

Suppose that you want to create a "college fund" for your newborn child and place $300 in a bank account at the end of each of the next 20 years.If that account earns an annual rate of return of 7%,how much will be in that account at the end of the twentieth year?