FINC 330 FINC330 Homework 2 Solution

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FINC 330 FINC330 Homework 2 Solution

Question 1

To what amount will the following investment accumulate?
$8,999, invested today for 15 years at 3 percent, compounded annually.
Round the answer to two decimal places.

Question 2
You placed $9,544 in a savings account today that earns an annual interest rate of 11 percent compounded annually. How much you will have in this account at the end of 2 years? Assume that all interest received at the end of the year is reinvested the next year.

Question 3
What is the present value of the following future amount?
$304,666, to be received 20 years from now, discounted back to the present at 6 percent, compounded annually.
Round the answer to two decimal places.

Question 4
If you want to have $372,585 in 9 years, how much money should you put in a savings account today? Assume that the savings account pays you 10.0 percent and it is compounded annually.
Round the answer to two decimal places

Question 5
The local home improvement store has a washing machine on sale for $1,509, with the payment due in 2 year(s) from today. The store is willing to discount the price at an annual rate of 2 percent (compounded annually) if you pay today. What is the amount if you pay for the washing machine today?
Round the answer to two decimal places.

Question 1
How many years will the following take?
$412 to grow to $14,729 if invested at 9.23 percent, compounded annually.
Round the answer to two decimal places.

Question 2
Upon graduating from college, you make an annual salary of $86,209. You set a goal to double it in the future. If your salary increases at an average annual rate of 3.67 percent, how long will it take to reach your goal?

Question 3
Cooling Tools, Inc. is currently producing 643 of small refrigerators per month but the company’s CEO plans to increase production at a rate of 10.99 percent per month until the firm is producing 7,282 of refrigerators per month. How many months will this take?

Question 4
At what annual rate would the following have to be invested?
$2,701, to grow to $78,675, in 39 years.
Round the answer to two decimal places in percentage form. (Write the percentage sign in the “units” box)

Question 5
A firm’s dividends have grown over the last several years. 8 years ago the firm paid a dividend of $2. Yesterday it paid a dividend of $7. What was the average annual growth rate of dividends for this firm?

Question 1
If you invest $8,698 today at an interest rate of 7.01 percent, compounded daily, how much money will you have in your savings account in 7 years?
Round the answer to two decimal places.

Question 2
To what amount will the following investment accumulate?
$31,295, invested today for 18 years at 17.00 percent, compounded monthly.
Round the answer to two decimal places.

Question 3
You placed $9,990 in a savings account today that earns an annual interest rate of 11.95 percent, compounded semiannually. How much will you have in this account at the end of 8 years? Assume that all interest received at the end of the period is reinvested the next period.
Round the answer to two decimal places.

Question 4
Stephen plans to purchase a car 5 years from now. The car will cost $69,870 at that time. Assume that Stephen can earn 4.10 percent (compounded monthly) on his money. How much should he set aside today for the purchase?
Round the answer to two decimal places.

Question 5
John plans to buy a vacation home in 5 years from now and wants to have saved $77,549 for a down payment. How much money should he place today in a saving account that earns 6.50 percent per year (compounded daily) to accumulate money for his down payment? Round the answer to two decimal places

Question 6
Camila plans to go for vacation to Australia in 6 years from now. She estimates that she will need $20,571 for the trip. How much does she need to place in a saving account today that earns 5.62 percent per year (compounded quarterly) to accumulate this amount?

Question 1
What is the accumulated sum of the following stream of payments?
$737 every year at the end of the year for 8 years at 8.25 percent, compounded annually.
Round the answer to two decimal places.

Question 2
For the next 8 years, you decide to place $2,104 in equal year-end deposits into a savings account earning 10.11 percent per year. How much money will be in the account at the end of that time period?

Question 3
What is the present value of the following annuity?
$2,907 every year at the end of the year for the next 12 years, discounted back to the present at 8.23 percent per year, compounded annually?

Question 4
You have accumulated some money for your retirement. You are going to withdraw $77,816 every year at the end of the year for the next 26 years. How much money have you accumulated for your retirement? Your account pays you 11.74 percent per year, compounded annually. To answer this question, you have to find the present value of these cash flows.

Question 1
You are given an investment to analyze. The cash flows from this investment are

Question 2
You have just purchased an investment that generates the following cash flows for the next four years. You are able to reinvest these cash flows at 8.0 percent, compounded annually.

Question 3
You have been offered the opportunity to invest in a project that will pay $1,199 per year at the end of years one through three and $14,027 per year at the end of years four and five. If the appropriate discount rate is 13.7 percent per year, what is the present value of this cash flow pattern?