While you were a student in college, you borrowed $12,000 in student loans at an interestrate of 9% per year, compounded annually. If you repay $1,500 per year, how long to thenearest year, will it take you to repay the loan?12000 = 1500 PVIFA (9%, N) 8=PVIFA(9%,N) N=6.29 years
You need to accumulate $10,000. To do so, you plan to make deposits of $1,250 per year,with the first payment being made a year from today, in a bank account which pays 12 %interest, compounded annually. Your last deposit will be less than $1,250 if less is neededto round out to $10,000. How many years will it take you to reach your $10,000 goal,and how large will the last deposit be? N=5.94 years. After 5 years, 1250(6.3528) = 7,9417941(1.12) = 8893.92 and 10000 - 8893.92=1106.92Can you suggest another method for solving this problem?
Your client is 40 years old and wants to begin saving for retirement. You advise the clientto put $5,000 a year into the stock market. You estimate that the market’s return will beon average of 12% a year. Assume the investment will be made at the end of the year.How much money will she have by age 65? By age 70?FV= 5000 FVIFA(12%, 25 years) = 666,669FV= 5000 FVIFA(12%, 30 years) = 1,206,663
You just started your first job, and you want to buy a house within 3 years. You arecurrently saving for the down payment. You plan to save $5,000 the first year. You alsoanticipate that the amount you save each year will rise by 10 percent a year as your salaryincreases over time. Interest rates are assumed to be 7 percent, and all savings occur atyear end. How much money will you have for a down payment in 3 years?5000(0.07-0.10) [1-(1.1/1.07)^3 ] =14,415.41 14415.41(1.07)^3 =17,659.50
A father is planning a savings program to put his daughter through college. His daughter is now 13 years old. She plans to enroll at the university in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year is $12,500, but a 5%annual inflation rate in the cost is expected. The daughter recently received $7,500 fromher grandfather’s estate; this money, which is invested in a bank account paying 8%interest, compounded annually, will be used to help meet the costs of the daughter’seducation. The rest of the costs will be met by money the father deposits in the savingsaccount. He will make 6 equal deposits to the account, one deposit in each year from noeuntil his daughter starts college. These deposits will begin today and will also earn 8 %on interest, compounded annually. How large must each deposit to be for him to be ableto put his daughter through college?131415161718192021-15954 -16751 -17589 -184682