Questions -
1) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.)
(a) What is the future value of $9,140 at the end of 7 periods at 8% compounded interest?
(b) What is the present value of $9,140 due 7 periods hence, discounted at 11%?
(c) What is the future value of 16 periodic payments of $9,140 each made at the end of each period and compounded at 10%?
(d) What is the present value of $9,140 to be received at the end of each of 20 periods, discounted at 5% compound interest?
2) Amos Excavating Inc. is purchasing a bulldozer. The equipment has a price of $103,000. The manufacturer has offered a payment plan that would allow Amos to make 12 equal annual payments of $16,628, with the first payment due one year after the purchase.
(a) How much total interest will Amos pay on this payment plan?
(b) Amos could borrow $103,000 from its bank to finance the purchase at an annual rate of 11%. Should Amos borrow from the bank or use the manufacturer's payment plan to pay for the equipment?
3) Derek Lee just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 5%, compounded annually.
(a) If Lee plans to establish the DL Foundation once the fund grows to $1,710,340, how many years until he can establish the foundation?
(b) Instead of investing the entire $1,000,000, Lee invests $300,000 today and plans to make 9 equal annual investments into the fund beginning one year from today. What amount should the payments be if Lee plans to establish the $1,710,340 foundation at the end of 9 years?