1. If you deposit $25,000 in an account that pays 9% interest annually, how much will be in your account after 18 years?
2. What is the present value of $40,000 in 8 years if the interest rate is 8% annually?
3. You parents will retire in 20 years. They currently have $50,000, and they think they will need $500,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don’t save any additional funds?
4. What is the future value of a 7%, 15-year ordinary annuity that pays $20,000 each year? If this was an annuity due, what would its future value be?
5. What is the present value of a 9%, 12-year ordinary annuity that pays $40,000 each year? If this was an annuity due, what would its present value be?
6. An investment will pay $500 at the end of the first year, $600 at the end of the second year, and $700 at the end of years 3 and 4. If other investments of equal risk earn 9 percent annually, what is its present value?
7. You want to buy a car and have to finance $20,000. The loan will be fully amortized over 5 years and the nominal interest rate will be 6% with interest and payments paid monthly. What will be the monthly loan payment?
8. When you apply for a credit card, you read that the annual interest rate is 22%. However, the fine print at the bottom of your monthly statement says that the interest compounds daily. What is the effective interest rate (the real rate you are paying)?