Problem
Calvin Johnson has a $5,500 debt balance on his Visa card that charges 16.3 percent APR compounded monthly. In 2009, Calvin's minimum monthly payment is 3 percent of his debt balance, which is $165.
How many months (round up) will it take Calvin Johnson to pay off his credit card if he pays the current minimum payment of $165 at the end of each month? In 2010, as the result of a federal mandate, the minimum monthly payment on credit cards rose to 4 percent. If Calvin made monthly payments of $220 at the end of each month, how long would it take to pay off his credit card?
Imagine that Homer Simpson actually invested the $110,000 he earned providing Mr. Burns entertainment 9 years ago at 8 percent annual interest and that he starts investing an additional $1,500 a year today and at the beginning of each year for 15 years at the same 8 percent annual rate. How much money will Homer have 15 years from today?
At a discount rate of 13.00% find the present value of a perpetual payment of $1,000 per year. If the discount rate were lowered to 6.50% half the initial rate, what would be the value of the perpetuity?
Selma and Patty Bouvier are twins and both work at the Springfield DMV. Selma and Patty Bouvier decide to save for retirement, which is 35 years away. They'll both receive an annual return of 9 percent on their investment over the next 35 years. Selma invests $2,000 per year at the end of each year only for the first 10 years of the 35-year period-for a total of $20,000 saved. Patty doesn't start saving for 10 years and then saves $2,000 per year at the end of each year for the remaining 25 years for a total of $50,000 saved. How much will each of them have when they retire?
Don Draper has signed a contract that will pay him $70,000 at the end of each year for the next 10 years, plus an additional $130,000 at the end of year 10? If 12 percent is the appropriate discount rate, what is the present value of this contract?
How much do you have to deposit today so that beginning 11 years from now you can withdraw $15,000 a year for the next 6 years (periods 11 through 16) plus an additional amount of $30,000 in the last year (period16)? Assume an interest rate of 5 percent.