Suppose you were selling your home. A buyer has offered to pay you $115,000 now and another $85,000 in 2 years. What is the value today of the payment received in 2 years, given your required rate of return is 7 percent?
Suppose you have the option to buy a parcel of vacant land to build your first home. The option is for a 5-year period, and the purchase price is $65,000. You do not intend to exercise the option until the end of the 5th year, which means you have 5 years to accumulate the required $65,000 in cash to buy the land. Given you have access to a savings account that pays 6 percent interest that compounds annually, how much will you have to save each year?
An individual purchasing a car has $500 now and can add another $500 in six months for a down payments. What is the amount of the in six months given your required rate of return is 5 percent?
You are a landlord and have decided for your tenants to contribute $1,000 a month towards rent payable. If you deposit each rental payment into an interest bearing account that pays an annual rate of 7 percent, but is compounded monthly, how much will be in the account at the end of 12 months?
You decide to replace the existing roof on your house for a cost of $25,000. You decide to save $1,200 per month in an account that pays 4 percent annual interest, compounded monthly. In how many months would you have enough saved in the account to purchase a new roof?
Suppose you are a mortgage lender. A borrower has promised to pay you $11,746 each year for 20 years. Given you want to earn a 10 percent rate of return per year, what is the most you are willing to lend the borrower?
You are thinking about letting a friend borrow $10,000 today given that she will repay you $15,000 in 5 years. What is your internal rate of return on the investment?