1. Amy Houston has a $25,900 debt that she wishes to repay 3 years from today; she has $18,435 that she intends to invest for the 3 years. What rate of interest will she need to earn annually in order to accumulate enough to pay the debt?
2. Cheyenne Excavating Inc. is purchasing a bulldozer. The equipment has a price of $92,800. The manufacturer has offered a payment plan that would allow Cheyenne to make 6 equal annual payments of $20,074.07, with the first payment due one year after the purchase.
a. How much total interest will Cheyenne pay on this payment plan?
b. Cheyenne could borrow $92,800 from its bank to finance the purchase at an annual rate of 7%? Should Cheyenne borrow from the bank or use the manufacturer’s payment plan to pay for the equipment?
3. What is the future value of 22 periodic payments of $5,920 each made at the beginning of each period and compounded at 8%?
4. What is the present value of $3,640 to be received at the beginning of each of 30 periods, discounted at 5% compound interest?