95 Review Problems (Part I)

Chapter 9 Review Problems Part I

1. Find the future value of $100 in five years at 5% interest.

2. Find the future value of $1,800 in 3 years at 8% interest.

3. How much would you have to deposit now to have $15,000 in eight years if interest is 7%?

4. What is the present value of $5,000 that will be paid to you eight years from today at 8% interest?

5. How many years will it take a $700 balance to grow into $900 in an account earning 5%?

6. If you borrow $1,000 and pay back $1,728 in three years, what annual rate of interest are you paying?

7. How long will it take you to triple your money at 8%?

8. A company’s sales were $250 million in 2019. If sales grow at 6% per year, how large will they be 10 years later, in 2029 (as expressed in millions)?

9. A US government bond in the amount of $1,000 will mature in six years, has no coupon payments, and carries an interest rate of 8%. What is the value of this bond today?

10. You spend $725.00 to purchase a $1,000 bond that will have no coupon payments and matures in 12 years. What interest rate will you be earning on this bond?

11. At what interest rate would you be ambivalent about receiving either $50,000 10 years from now or $35,000 today?

12. Vance Corporation had earnings last year of $3.25 per share. The company has experienced 8% annual growth over the last several years, and management expects that growth rate to continue. Based on this information, after how long will earnings per share double?

13. What is the amount of total interest dollars earned on a $5,000 deposit earning 6% for 20 years?

14. You have decided that you will sell your $300,000 house when it appreciates in value to $500,000. If houses are appreciating at an average annual rate of 5% in your neighborhood, for approximately how long will you be staying in your house?

15. You just won some money in the lottery and would like to save a portion of it so that you will have $50,000 to put a down payment on a house in five years. Your bank pays a 5% rate of interest. How much money will you have to set aside from the lottery winnings?

16. Bauer Bookstore sells books before they are published. Today, they offered the book Journeys in Finance for $14.20, but the book will not be published for another two years. Upon publishing, the price of the book will be $24.00. What is the discount rate Bauer Bookstore is offering its customers for this book?

17. One of your professional goals is to one day earn a six-figure salary ($100,000). You hope to accomplish this objective within the next 30 years. Salaries grow at 3.75% per year in your field of work. What beginning salary will you need in order to reach this 30-year goal?

18. How much will $25,000 grow to in five years at a 5% annual rate that is compounded quarterly?

19. If Eisenberg Industries revenues have increased from $30 million to $90 million over a 10-year period, what has been their annual rate of growth?

20. If you are scheduled to receive $4,000 six years from today and the discount rate is 8.5%, what is the present value of this payment?

21. If you were to open a savings account that earns 3% interest and is compounded quarterly, what would be the total amount in your account after 10 years if you made an opening deposit of $9,500?

22. You are considering four possible options for your new savings account. You plan to deposit $13,000 and leave this amount in the account for 20 years with no additional deposits or withdrawals. All of these account options would earn 6% interest, but each one has a different compounding frequency, listed below. What would be the value of each account at the end of the 20-year period?