1. You are schedule to receive $10,000 in two years. When you receive it, you will immediately invest it for six more years in a savings account that earns 5% annually. How much money will you have in eight years?
2. Suppose the Texas lottery advertises that it pays its winner $5 million. However, this prize money is paid at the rate of $1 million each year (with the first payment being immediate, at year 0) for a total of 5 payments. What is the present value of this prize at 10% annual interest rate?
3. Suppose you invest $1,000 into a mutual fund that is expected to earn an annual rate of return of 11%. How much money will you have in 10 years? How much money will you have in 50?
4. What is the present value of $50,000 received twenty years from now, assuming the interest rate is 6% per year?
5. Suppose you deposit $10,000 in a savings account that earns an interest of 10.41% per year. In how many years will your savings double (round to nearest whole number)? Note: use the formula for FV and note that here you have a future value ($20,000), a current amount ($10,000), an interest rate (10.41%), but you are missing the number of periods n. Use algebra to solve for it.
6. Refer back to problem #5. Suppose the interest rate is now only 2.0% per year. In how many years will your savings double?