1. What is the present value of:
$8,000 in 10 years at 6 percent?
$16,000 in 5 years at 12 percent?
$25,000 in 15 years at 8 percent?
$1,000 in 40 years at 20 percent?
2. If you invest $8,000 per period for the following number of periods, how much would you have?
10 years at 5 percent
20 years at 9 percent
35 periods at 11 percent
3. Mr. Johnson will receive $6,500 a year for the next 14 years from his trust. If an 8 percent interest rate is appropriate:
What is the current value of the future payments?
What is the current value, if they are received at the beginning of each year?
4. The Lucky Leprechaun Casino awards $5,000,000. It will be paid over the next 50 years at the rate of $100,000 per year with the first payment today. With a discount rate of 11 percent, what is the present value of this prize?
5. If you owe $30,000 at the end of seven years, how much should your creditor accept in payment immediately if he could earn 11 percent on his money?
6. Determine the amount of money in a savings account at the end of five years, given an initial deposit of $3,000 and an 8 percent annual interest rate when interest is compounded (a) annually, (b) semiannually, and (c) quarterly. Calculate the effective annual interest rate of each compounding possibility.
7. John Smith and his heirs will receive $500 a year forever with a long-term annual expected interest rate of 7 percent. What is the current worth of this annuity?
8. If you borrow $9,725 and are required to pay back the loan in five equal annual installments of $2,500, what is the interest rate associated with the loan?