Finance Problems
1. After placing $8,000 in a savings account paying annual compound interest of 7%, calculate the amount that will accumulate if it is left for 10 years?
2. Sarah Wiggum would like to make a single investment and have $1.6 million at the time of her retirement in 35 years. She has found a retirement fund that will earn 4% annually. How much will Sarah have to invest today? If she earned an annual return of 18%, how soon could she then retire?
3. To buy a new house you must borrow $150,000. To do this, you take out a $150,000, 20-year, 9% mortgage. Your mortgage payments, which are made at the end of each year (one payment each year), include both principle and 9% interest on the declining balance. How large will your annual payments be? What amount will your annual payment be?
4. What is the present value of a $650 perpetuity discounted back to the present at 12%? What is the present value of the perpetuity?
5. How much do you have to deposit today so that beginning 11 years from now, you can withdraw $9,000 a year for the next eight years (periods 11 through 18) plus an additional amount of $18,000 in the last year (period 18)? Assume an interest rate of 8%. What is the amount of money you would need to deposit today?