Question 1. If you invest $2,000 a year in a retirement account, how much would you have:
a. In 5 years at 6 percent?
b. In 20 years at 10 percent?
c. In 40 years at 12 percent?
Question 2. You invest a single amount of $10,000 for 5 years at 10 percent. At the end of 5 years you take the proceeds and invest them for 12 years at 15 percent. How much will you have after 17 years?
Question 3. Carrie Tune will receive $19,500 for the next 20 years as a payment for a new song she has written. If a 10 percent rate is applied, should she be willing to sell out her future rights now for $160,000.
Question 4. Your rich godfather has offered you a choice of one of the three following alternatives: $10,000 now; $2,000 a year for eight years; or $24,000 at the end of eight years. Assuming you could earn 11 percent annually, which alternative should you choose? If you could earn 12 percent annually, would you still choose the same alternative?