Time Value of Money

1a You have $50,000 invested at 6% interest annually.
How long will it take to double your money?

1b What if you only had $3,000 invested in that account?
Then how long would it take to double your money?

2 If you want to double your money every 10 years, what
annual interest rate would you need on that account?

3a You have an investment account that is earning 8.5%
compounded monthly. What is the effective rate?

3b What if that account was being compounded daily?
What is the effective rate then?

4 What is the future value of $5,000 invested at 12%
interest, compounded annually, at the end of 30 years?

5a If you deposit $1,000 each year in an account earning
8% interest annually, how much will you have
at age 21?

5b at age 45?

5c at age 65?

6 You want to have $1,000,000 when you retire in 40 years.
You have an opportunity to invest in an account earning
9% interest annually.
How much would you need to deposit now to reach your goal?

7 You want to buy a new car for $45,000.
After taxes and your down payment you need to finance $42,000.
If you take out a loan for 4 years at a 8% APR, then how much
will your monthly payments be?

8 The Rojas family wants to buy a sport SUV. They decide on a 4-wheel
Jeep Grand Cherokee. The price with tax of the vehicle is $41,850.
The Rojas’ have $1,000 as a down payment.
The dealership tells them Jeep has two promotion options running:
Option 1: 0% APR financing for 72 months
Option 2: $5,000 rebate (which will be applied towards the price)
and 3.49% APR for 72 months

8a What would the monthly payments be under Option 1?

8b What would the monthly payments be under Option 2?

8c Which option would give the Rojas family a lower monthly payment?

9 You start an investment account with $5,000.
Your plan is to deposit $250 into this account every month.
If this account earns 7% compounded annually, then how
much will you have saved in 35 years?