Problem 1: If a firm has $250,000 to invest and can earn 8.5%, compounded annually, how much will the firm have after two years?
Problem 2 - Future Value of Retirement Account
A self-employed person deposits $1,250 annually in a retirement account that earns 5.5%.
What will be the account balance at age 62 if the savings program starts when the individual is age 50?
How much additional money will be in the account if the saver defers retirement until age 66 and continues the annual contributions until then?
How much additional money will be in the account if the saver discontinues the contributions at age 62, but lets it build up until retirement at age 66?
Problem 3 - Present Value of Savings Account
A father has decided to set aside a one time lump sum for college that will amount to $60,000 by the time his 5 year old is 18 years old (13 years). Using 8% as the rate and assuming no further investments will be made, how much must the father invest today in order to have $60,000 in 13 years?
Problem 4 - Home Loan
A couple borrows $935,000 for 7 years for the purchase of a vacation home at an interest rate of 7%.
The loan requires that the interest and principal be paid in equal, annual payments. The interest is determined on the declining balance that is owed.
What are the required annual payments on the loan?
How much is the principal loan balance reduced by during the first year?
Problem 5 - Lease Payments
A company leases equipment for 7 years.
The equipment costs $28,000 and the owner wants to earn 9.5% on the lease.
What should be the required lease payments?