FINANCIAL PLANNING PROBLEMS Jeremy Nolan 1667016

(Note: Some of these problems require the use of the time value of money tables in the Chapter 1
Appendix.)

Chapter 1
1. Calculating the Future Value of Property. Ben Collins plans to buy a house for $220,000. If that
real estate property is expected to increase in value 3 percent each year, what would its approximate
value be seven years from now?
270572.25
5. Calculating Earnings on Savings. What would be the yearly earnings for a person with $8,000 in
savings at an annual interest rate of 2.5 percent?
200
6. Computing the Time Value of Money. Using time value of money tables, calculate the following:
a. The future value of $450 six years from now at 7 percent.
675.33
b. The future value of $900 saved each year for 10 years at 8 percent.
13037.91
c. The amount a person would have to deposit today (present value) at a 6 percent interest
rate to have $1,000 five years from now.
747.26
d. The amount a person would have to deposit today to be able to take out $600 a year for
10 years from an account earning 8 percent.
577.77
8. Calculating the Time Value of Money for Savings Goals. If you desire to have $20,000 for a down
payment for a house in five years, what amount would you need to deposit today? Assume that your
money will earn 5 percent.
15670.52

FINANCIAL PLANNING PROBLEMS Jeremy Nolan 1667016

Chapter 3
2. Calculating Balance Sheet Amounts. Based on the following data, compute the total assets, total
liabilities, and net worth.
Liquid assets, $4,670 Household assets, $93,780 Investment assets, $26,910 Long-term liabilities,
$76,230 Current liabilities, $2,670
total assets=125360/total liabilities=78900/net worth=46460
4. Computing Balance Sheet Amounts. For each of the following situations, compute the missing
amount.
a. Assets $45,000; liabilities $12,600; net worth $ 32400.
b. Assets $78,980; liabilities $ 65280 ; net worth $13,700.
c. Assets $44,280; liabilities $12,965; net worth $ 31315 .
d. Assets $ 92140 ; liabilities $38,345; net worth $53,795.

5. Calculating Financial Ratios. The Fram family has liabilities of $128,000 and a net worth of
$340,000. What is their debt ratio? How would you assess this?
0.27/Liabilities divided by assets
12. Future Value of Savings. Kara George received a $4,000 gift for graduation from her uncle. If she
deposits the entire amount in an account paying 3 percent, what will be the value of this gift in 15 years?
6231.87

FINANCIAL PLANNING PROBLEMS Jeremy Nolan 1667016

Chapter 5

3. Computing CD Interest. A certificate of deposit will often result in a penalty for withdrawing
funds before the maturity date. If the penalty involves two months of interest, what would be the
amount for early withdrawal on a $20,000, 6 percent CD?
19800
4. Computing Future Value. What would be the value of a savings account started with $1,200,
earning 3 percent (compounded annually) after 10 years?
1612.70
6. Computing Future Value of Annual Deposits. What amount would you have if you deposited
$2,500 a year for 30 years at 8 percent (compounded annually)? (Use the Chapter 1 appendix.)
283208.03

FINANCIAL PLANNING PROBLEMS Jeremy Nolan 1667016

1. Calculating the Amount for an Emergency Fund. Beth and Bob Martin have a total take-home pay
of $4,000 a month. Their monthly expenses total $2,900. Calculate the amount the couple needs to
establish an emergency fund. How did you calculate this amount? (LO13-1)
2900x3-6=8700-17400
3. Determining Profit or Loss from an Investment. Three years ago, you purchased 150 shares of
IBM stock for $92 a share. Today, you sold your IBM stock for $183 a share. For this problem, ignore
commissions that would be charged to buy and sell your IBM shares and dividends you might have
received as a shareholder.
a. What is the amount of profit you earned on each share of IBM stock? 91
b. What is the total amount of profit for your IBM investment? 13650

5. Calculating Rate of Return. Assume that at the beginning of the year, you purchase an
investment for $5,500 that pays $110 annual income. Also assume the investment’s value has increased
to $6,400 by the end of the year. (LO13-2)

a. What is the rate of return for this investment? 1.18/118%

b. Is the rate of return a positive or negative number? positive

7. Calculating Rate of Return. Assume that at the beginning of the year, you purchase an
investment for $7,000 that pays $100 annual income. Also assume the investment’s value has decreased
to $6,600 by the end of the year.

a. What is the rate of return for this investment?-0.96/-96%

b. Is the rate of return a positive or negative number? negative