Tvm of Money

Poor Dog, Inc. borrowed $135,000 from the bank today. They must repay this money over the next six years by making monthly payments of $2,215.10. What is the interest rate on the loan? Express your answer with annual compounding.

What annual interest rate is needed to produce $200,000 after five years if only $100,000 is invested?

10. An investment of $1,000 today will grow to $1,100 in one year. What is the continuously compounded rate of return?

2. If you had a payment that was due you in 5 years for $50,000 and you could earn a 5% rate of return, how much

a. How much must be invested today in a CD paying 8.4 percent annual interest in order to

e. Assume now that you earn 8.8% per year on your total contribution (from part 2.b.), how much will that one year of savings grow into in 40 years?

After the calculations you end up coming out with a rate of 14.87%. The third and final part of question three asks what rate you will need if the interest is compounded semiannually. All you have to do is double the amount of terms and you will come out with a lower number of 7.177%. Since the interest is compounded semiannually that means that you will need to times that number by two and you come out with your final number of 14.35%.

A. You have just won the Strayer Lottery jackpot of $11,000,000. You will be paid in 26 equal annual installments beginning immediately. If you had the money now, you could invest it in an account with a quoted annual interest rate of 9% with monthly compounding of interest. What is the present value of the payments you will receive?

Present value: John Hsu wants to start a business in 12 years. He hopes to have $130,000 at that time to invest in the business. To reach his goal, he plans to invest a certain amount today in a bank CD that will pay him 7.50 percent annually. How much will he have to invest today to achieve his target? (Round to the nearest dollar.)

Refer to question 9. What would be the future value if interest is compounded daily?

Assume I won 10 million dollars in a lottery that pays installments of 2 million dollars a year for five years or a lump sum of less than 10 million dollars. If I take the installments, my first installment would come the day I claimed my winnings at the state lottery office. If I take the lump sum, I would receive that payment the day I claimed my winnings at the state lottery office. Assume that the interest rate is 5% per year. Calculate what the lump sum should be so that it would exactly equal the stream of installments. You must show and explain your work to be given credit for this assignment

After the last withdrawal, you do not want any money left over in your retirement account. The interest rate in nominal terms is 9% and the inflation rate is 4%. i) How much money will you withdraw in nominal terms on your 70th birthday? In nominal terms on your 75th birthday?

7. Billy Bob has decided to put $2,400 a year (at the end of each year) into an IRA over his 40 year working life and then retire. What will Billy have if the account will earn 10 percent compounded annually?

50,000 - 41,159.84 = 8840.16 is amount of the payment that went to paying the principal, while (966.64 12) - 8840.416 = 2759.52 was interest.

Perpetual Cash Flows What is the value of an investment that pays $7,500 every other year forever, if the first payment occurs one year from today and the discount rate is 11 percent compounded daily?