1. Mr. Smith wants to save for his son's college education. If he deposits $200 each month at 2% compounded monthly, how much will he have in the account after 12 months?
2. Imagine investing $325 monthly into a 401(k) retirement account that averages an APR of 6.75% compounded monthly. You do this consistently for 45 years until retirement. Use the savings plan formula to calculate your final balance (future value). After this calculation, find how much of this future value is principal and how much is interest.
3. Suppose you want to accumulate $73,000 to serve an 18-month mission with your spouse 45 years from now. Use the savings plan formula to see if the following investment will allow you to reach your financial goal. Assume that the number of payments periods and compoundings are the same.
You deposit $50 per month into an investment portfolio that averages an APR of 6%.
Final Balance:
4. Suppose you are going to need $45,000 for your child to attend college 16 years from now. How much would you have to deposit monthly into an annuity bearing 5.25% interest compounded monthly in order to meet your goal?
5. In 5 years Ed and Trixie would like to have $27,000 for a down payment on a house. How much should they deposit each quarter into an account paying 7% compounded quarterly?
6. Suppose you want to have enough money in the bank 50 years from now (when you retire) so that the interest on the account would be enough to live on each year from then on. If you'll need $70,000 yearly to live on, how much will need to be sitting in your bank account when you start retirement? Assume an average APR of 5%. How much would you need to save each month to have this much saved in 50 years? Monthly payment? Savings when you start retirement?
7. 9 years after paying $26,150 for a half-acre lot in Rexburg, Idaho, you are able to sell it for $32,600. Compute the total and annual returns for the investment. Total return? Annual Return?
8. Kaylene deposits $200 per month in an investment account that earns 4.25% compounded monthly for 6 years.
Kristen, on the other hand, deposits $2,400 at the end of each year into a similar account that also earns 4.25% compounded annually for 6 years.
Even though they each contribute the same amount of principal with the same APR and length of investment time, who comes out ahead and by how much?