Workshop 2

Question Sheet

Acctg151G

1 Saving for an Overseas Holiday

You have recently won $32,000 in a quiz show. You would like to invest some of this money for a
six-month holiday in Europe when you have completed your bachelor degree in three years time.
You have estimated that you would need $12,000 for the holiday.
(a) How much would you need to deposit now in an investment returning:
i.

6% compounded annually?

ii.

8% compounded annually?

2 Borrowing Opportunity
You would like to go flatting and your father agrees to lend you some money for furniture.

He

has asked that you pay the same rate of return as he is currently earning (10% per annum) and that
you repay the money a year after you complete your university studies. You estimate that you
could save $10,000 in your first full-time year of employment.
(a) How much should your father lend you now if you will repay $10,000 in
i.

four years time (a year after completing a bachelor degree)?

ii.

six years time (master degree)?

3 Winning a Choice
You have just won a lottery prize and you have the choice of receiving $100,000 now or $15,000
at the end of each year for the next 12 years.
(a) If you have the opportunity to invest at 15% per annum, what option would you choose?

Workshop 2

Question Sheet

Acctg151G

4 Financing a Car
(a) You intend to buy a car and think you can afford repayments of $2,500 each year.

The

current interest rate is 12% per annum. How much can you borrow if the loan period is
i.

five years?

ii.

eight years?

(b) The bank offers you a loan of $12,000 to be repaid with equal annual payments for six years.
If the interest rate is 10% per annum, what are the annual repayments?

(c) You borrow $10,000 to be repaid over six years. If the annual repayments are $2,570, what is
the interest rate (nearest %)?

5.

Julie Miller deposits $10,000 today at a compound annual interest rate of 10%. How much will she

receive in 5 years time?

How much will she receive if the interests are compounded semi-annually?

6.

How much would you accumulate if you could invest $2000 every year for the next 5 years

earning interest at 10% pa?