1) After placing $13,000 in a savings account paying annual compound interest of 4%, Leona will accumulate what amount if she leaves the money in the bank for 3 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) What is the present value of a perpetual stream of cash flows that pays $80,000 at the end of one year and grows at a rate of 7% indefinitely? The rate of interest used to discount the cash flows is 9%. What is the present value of the growing perpetuity?
4) To pay for your education you have taken out $28,000 in student loans. If you make monthly payments over 13 years at 6% compounded monthly, how much are your monthly student loan payments?
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?