Question 1
A financial planner recommends that you have accumulated $2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of 5%, how much must you invest for each of the next 25 years in order to achieve this goal? Financial Planning: Every individual, with or without the help of a professional financial planner, at some point engages in the process of projecting his/her financial needs and taking steps to meet those needs. This process is called financial planning.
Question 2
A financial planner recommends that you have accumulated $2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of 5%, how much must you invest for each of the next 25 years in order to achieve this goal?
Question 3
Your parents tell you that if you apply yourself and earn a minimum grade of B – in Finance 3101, they will reward you by depositing in your account $1,050 next year, $1,500 the following year and $2,500 the year after that. If you can earn an annual rate of 4%, how much would you have in your account immediately after yourparents’ final deposit?
A.$5.050.00
B.$5,252.00
C.$5,175.80
D. $5,195.68
Your parents have promised you possible deposits of $!,050, $1,500 and $2,500 at the end of the next three years, respectively. If your parents can earn 6% per year, what size of a one-time deposit would they have to make today in order to keep their promise?
A.$5,050.00
B.$5,317.64
C.$4,459.18
D.$4,424.61
A security that is selling for $3,000 and promises to pay annual interest or $250 forever would have an annual yield of
A.8.33%
B.12.00%
C.1.20%
D.11.00%
You deposit $150 at the end of each of the next 12 years earning 9.00% per year. What would your balance be at the end of the 12 years?
A.$3,021.11
B.$2,753,66
C.$1,200.00
D.$4,404.14
You borrow $200,000 for 18 years at an annual rate of 5.20%.. What would be your fixed QUARTERLY loan payment?
A.$3,694
B.$8,134
C.$4,294
D.$6,027
For an 18-year fixed payment loan for $200,000 with an annual interest rate of 5.20% and making QUARTERLY payments, what percent of your first payment would apply to the principal?
A.39.45%
B.51.17%
C.45.87%
D.38.16%
A financial planner recommends that you have accumulated $2.0 million by the time that you retire in 25 years. If you can earn an annual rate of return of 5%, how much must you invest for each of the next 25 years in order to achieve this goal?
A.$41,905
B.$38,179
C.$36.553
D.$43,879
Present value. A smooth-talking used-car salesman who smiles considerably is offering you a great deal on a “pre-owned” car. He says, “For only 44 annual payments of $2,6002,600, this beautiful 1998 Honda Civic can be yours.” If you can borrow money at 10%,what is the price of this car? Assume the payment is made at the end of each year.
Answer to question 1
Let
FV = future value = $2,000,000
PMT = periodic payment
r = interest rate = 5%
n = number of periods = 25
The balance is the future value of the annuity of deposits:
Answer to question 2
P = FV (r)
(1+r)n – 1
= $2000000 (0.05)
(1+0.05)25 – 1
= $41904.91
Investment amount every year for 25 years = $41904.91
Answer to question 3
1. Your parents tell you that if you apply yourself and earn a minimum grade of B – in Finance 3101, they will reward you by depositing in your account $1,050 next year, $1,500 the following year and $2,500 the year after that. If you can earn an annual rate of 4%, how much would you have in your account immediately after yourparents’ final deposit?
FV = 1,050 * (1 + 0.04)^2 + 1,500 * (1 + 0.04)^1 + 2,500
FV = $5,195.68 (OPTION D)
2. Your parents have promised you possible deposits of $1,050, $1,500 and $2,500 at the end of the next three years, respectively. If your parents can earn 6% per year, what size of a one-time deposit would they have to make today in order to keep their promise?
PV = 1,050/(1 + 0.06)^1 + 1,500/(1 + 0.06)^2 + 2,500/(1 + 0.06)^3
PV = $4,424.608905338
Answer: D. $4,424.61