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FIN5100:TIME VALUE OF MONEY EXERCISE (Part 1)

1. You deposit $2,000 in a savings account that pays 10 percent interest, compounded annually.  How much will your account be worth in 15 years?

2. You deposit $100,000 in a savings account that pays 10 percent interest, compounded semiannually.  How much will your account be worth in 15 years?

3. You can earn 15 percent interest, compounded annually.  How much must you deposit today to withdraw $4,000 in 10 years?

4. You can earn 12 percent interest, compounded quarterly.  How much must you deposit today to withdraw $40,000 in 5 years?

5. In 1958 the average tuition for one year at an Ivy League school was $1,800.  Thirty years later, in 1988, the average cost was $13,700. What was the growth rate in tuition over the 30-year period?

6. Suppose you invested $1,000 in stocks 10 years ago.  If your account is now worth $2,839.42, what rate of return did your stocks earn?

7. You are currently investing your money in a bank account which has a nominal annual rate of 8 percent, compounded annually.  If you invest $2,000 today, how many years will it take for your account to grow to $10,000?

8. If $100 is placed in an account that earns a nominal 4 percent, compounded quarterly, what will it be worth in 5 years?

9. You just put $1,000 in a bank account which pays 6 percent nominal annual interest, compounded monthly.  How much will you have in your account after 3 years?

10. You are currently investing your money in a bank account which has a nominal annual rate of 7.23 percent, compounded annually.  How many years will it take for you to double your money?

11. You deposited $1,000 in a savings account that pays 8 percent interest, compounded quarterly, planning to use it to finish your last year in college.  Eighteen months later, you decide to go to the Rocky Mountains to become a ski instructor rather than continue in school, so you close out your account.  How much money will you receive?