{"id":574,"date":"2023-03-28T16:29:00","date_gmt":"2023-03-28T16:29:00","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/?post_type=chapter&p=574"},"modified":"2023-04-03T00:15:59","modified_gmt":"2023-04-03T00:15:59","slug":"review-problems-part-i","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/review-problems-part-i\/","title":{"raw":"Review Problems (Part I)","rendered":"Review Problems (Part I)"},"content":{"raw":"
\r\n
\r\n

Chapter 9 Review Problems Part I<\/h2>\r\n1<\/span>. <\/span>Find the future value of $100 in five years at 5% interest.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n2<\/span>. <\/span>Find the future value of $1,800 in 3 years at 8% interest.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n3<\/span>. <\/span>How much would you have to deposit now to have $15,000 in eight years if interest is 7%?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n4<\/span>. <\/span>What is the present value of $5,000 that will be paid to you eight years from today at 8% interest?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n5<\/span>. <\/span>How many years will it take a $700 balance to grow into $900 in an account earning 5%?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n6<\/span>. <\/span>If you borrow $1,000 and pay back $1,728 in three years, what annual rate of interest are you paying?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n7<\/span>. <\/span>How long will it take you to triple your money at 8%?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n8<\/span>. <\/span>A company\u2019s 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)?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n9<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n10<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n11<\/span>. <\/span>At what interest rate would you be ambivalent about receiving either $50,000 10 years from now or $35,000 today?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n12<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n13<\/span>. <\/span>What is the amount of total interest dollars earned on a $5,000 deposit earning 6% for 20 years?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n14<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n15<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n16<\/span>. <\/span>Bauer Bookstore sells books before they are published. Today, they offered the book\u00a0<\/span>Journeys in Finance<\/i>\u00a0for $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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n17<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n18<\/span>. <\/span>How much will $25,000 grow to in five years at a 5% annual rate that is compounded quarterly?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n19<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n20<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n21<\/span>. <\/span>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?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n22<\/span>. <\/span>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?<\/span>\r\n
\r\n
\r\n
    \r\n \t
  1. Annually<\/li>\r\n \t
  2. Semiannually<\/li>\r\n \t
  3. Quarterly<\/li>\r\n \t
  4. Monthly<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nAttribution:<\/strong>\r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.","rendered":"
    \n
    \n

    Chapter 9 Review Problems Part I<\/h2>\n

    1<\/span>. <\/span>Find the future value of $100 in five years at 5% interest.<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    2<\/span>. <\/span>Find the future value of $1,800 in 3 years at 8% interest.<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    3<\/span>. <\/span>How much would you have to deposit now to have $15,000 in eight years if interest is 7%?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    4<\/span>. <\/span>What is the present value of $5,000 that will be paid to you eight years from today at 8% interest?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    5<\/span>. <\/span>How many years will it take a $700 balance to grow into $900 in an account earning 5%?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    6<\/span>. <\/span>If you borrow $1,000 and pay back $1,728 in three years, what annual rate of interest are you paying?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    7<\/span>. <\/span>How long will it take you to triple your money at 8%?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    8<\/span>. <\/span>A company\u2019s 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)?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    9<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    10<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    11<\/span>. <\/span>At what interest rate would you be ambivalent about receiving either $50,000 10 years from now or $35,000 today?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    12<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    13<\/span>. <\/span>What is the amount of total interest dollars earned on a $5,000 deposit earning 6% for 20 years?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    14<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    15<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    16<\/span>. <\/span>Bauer Bookstore sells books before they are published. Today, they offered the book\u00a0<\/span>Journeys in Finance<\/i>\u00a0for $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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    17<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    18<\/span>. <\/span>How much will $25,000 grow to in five years at a 5% annual rate that is compounded quarterly?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    19<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    20<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    21<\/span>. <\/span>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?<\/span><\/p>\n<\/div>\n<\/div>\n

    \n
    \n

     <\/p>\n

    22<\/span>. <\/span>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?<\/span><\/p>\n

    \n
    \n
      \n
    1. Annually<\/li>\n
    2. Semiannually<\/li>\n
    3. Quarterly<\/li>\n
    4. Monthly<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

       <\/p>\n

      Attribution:<\/strong><\/p>\n

      This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n","protected":false},"author":101,"menu_order":11,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-574","chapter","type-chapter","status-publish","hentry"],"part":36,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":5,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/574\/revisions"}],"predecessor-version":[{"id":1308,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/574\/revisions\/1308"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/36"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/574\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=574"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=574"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=574"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}