PV and FV of $1
Mordica Company will receive $400,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $400,000 receipt is
a. $204,000.
b. $205,264.
c. $604,000.
d. $779,488.
b. $205,264.
Barkley Company will receive $800,000 in a future year. If the future receipt is discounted at an interest rate of 8%, its present value is $504,136. In how many years will the $800,000 be received?
a. 5 years
b. 6 years
c. 7 years
d. 8 years
b. 6 years
Lucy and Fred want to begin saving for their child's college education. They estimate that they will need $200,000 in eighteen years. If they can earn 6% per year, how much must be deposited each year over the next eighteen years to fund the education?
a. $6,471
b. $6,105
c. $11,110
d. $5,924
b. $6,471
The Johannsens know they will be needing to replace the roof on their home soon. If the estimated cost to replace the roof is $25,000 and they can save $3,600 at the end of each year, how long will it take them to save up enough to replace the roof assuming they can earn 6% on their savings?
a. 5 years
b. 2 years
c. 8 years
d. 6 years
d. 6 years
Nate is planning to invest his $5,000 graduation gift from his parents. The account he is looking at earns a 10% annual return with interest compounding quarterly. What amount will Nate have in the account after 5 years?
a. $8,052.55.
b. $6,444.50.
c. $7,500.00.
d. $8,193.10.
d. $8,193.10.
Dunston Company will receive $500,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $256,580. In how many years is the $500,000 received?
a. 5 years
b. 6 years
c. 7 years
d. 8 years
c. 7 years
Sonata Corporation will receive $40,000 on January 1, 2025 and each January 1 for the next five years (2026 – 2030). What is the present value of the six $40,000 receipts, assuming a 12% interest rate?
$184,191
PV = $242,980
PMT = $75,000
n = 4
What is the interest rate?
9%
Jamaal wants to have $5,0080,000 when he retires in 30 years. Assuming he can earn a 10% annual return, what does he need to invest today?
$286,550.
An uncle asks to borrow $1,000 today and promises to repay you $1,300 two years from now. What annual interest rate would you be agreeing to?
14%
If I invest $25,000 every December 31 for the next six years into an account that earns 12% on the investment, what amount will be in the investment fund on in 5 years?
$202,880
An individual deposits $2,000 at the end of every six months into an investment account that earns 8% annual interest, compounded semiannually.
How many years will it take for the account to grow to $150,000?
17.7 years
Altman Company invests $900,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In five years, the amount in the investment fund is...
$1,204,407.
PV = $44,421
FV = $80,000
n = 15
What is the annual interest rate?
4%
A recent college graduate decides to start saving for a home purchase. She deposits $450 at the end of every month into an investment account that earns 6% annual interest, compounded monthly.
She plans to make these deposits for 12 years.
What will be the future value of her savings at the end of the 12 years?
$94,230.
An investor deposits $600 at the end of every month into a retirement account for 20 years. At the end of the 20 years, the account balance is $310,000.
Assume interest is compounded monthly.
What is the annual interest rate (APR) earned on the account?
6.78%