Term
| Amit Patel is planning to invest $10,000 in a bank certificate of deposit (CD) for five years. The CD will pay interest of 9 percent. What is the future value of Amit's investment? |
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Definition
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Term
| Megan Gaumer expects to need $50,000 as a down payment on a house in six years. How much does she need to invest today in an account paying 7.25 percent? |
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Definition
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Term
| Kelly Martin has $10,000 that she can deposit into a savings account for five years. Bank A pays compounds interest annually, Bank B twice a year, and Bank C quarterly. Each bank has a stated interest rate of 4 percent. What amount would Kelly have at the end of the fifth year if she left all the interest paid on the deposit in each bank? |
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Definition
Bank A: $12,166.53
Bank B: $12,189.94
Bank C: $12,201.90 |
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Term
| You have an opportunity to invest $2,500 today and receive $3,000 in three years. What will be the return on your investment? |
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Definition
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Term
| Emily Smith deposits $1,200 in her bank today. If the bank pays 4 percent simple interest, how much money will she have at the end of five years? What if the bank pays compound interest? How much of the earnings will be interest on interest? |
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Definition
Simple interest = 1200 x .04 = 48
48 x 5 = 240
1200 + 240 = $1440
Compound interest = $1,459.98
Interest on interest
1459.98 - 1200 - 240 = $19.98 |
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Term
| Chuck Tomkovick is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the value of the investment in 10 years? |
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Definition
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Term
| Ted Rogers is investing $7,500 in a bank CD that pays a 6 percent annual interest. How much will the CD be worth at the end of five years? |
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Definition
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Term
| Your aunt is planning to invest in a bank CD that will pay 7.5 percent interest semiannually. If she has $5,000 to invest, how much will she have at the end of four years? |
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Definition
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Term
| Kate Eden received a graduation present of $2,000 that she is planning on investing in a mutual fund that earns 8.5 percent each year. How much money can she collect in three years? |
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Definition
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Term
| Your bank pays 5 percent interest semiannually on your savings account. You don't expect the current balance of $2,700 to change over the next four years. How much money can you expect to have at the end of this period? |
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Definition
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Term
| Your birthday is coming up and instead of other presents, your parents promised to give you $1,000 in cash. Since you have a part-time job and, thus, don't need the cash immediately, you decide to invest the money in a bank CD that pays 5.2 percent quarterly for the next two years. How much money can you expect to earn in this period of time? |
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Definition
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Term
Find the future value of an investment of $100,000 made today for five years and paying 8.75 percent for the following compounding periods:
a. Quarterly.
b. Monthly.
c. Daily.
d. Continuous. |
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Definition
Quarterly: $154,154.24
Monthly: $154,637.37
Daily: $154,874.91
Continuous: $154,883.03 |
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Term
| Joe Mauer, a catcher for the Minnesota Twins, is expected to hit 15 home runs in 2012. If his home-run-hitting ability is expected to grow by 12 percent every year for the following five years, how many home runs is he expected to hit in 2017? |
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Definition
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Term
| Roy Gross is considering an investment that pays 7.6 percent. How much will he have to invest today so that the investment will be worth $25,000 in six years? |
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Definition
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Term
| Maria Addai has been offered a future payment of $750 two years from now. If she can earn 6.5 percent compounded annually on her investment, what should she pay for this investment today? |
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Definition
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Term
| Your brother has asked you for a loan and has promised to pay back $7,750 at the end of three years. If you normally invest to earn 6 percent per year, how much will you be willing to lend to your brother? |
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Definition
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Term
| Tracy Chapman is saving to buy a house in five years. She plans to put 20 percent down at that time, and she believes that she will need $35,000 for the down payment. If Tracy can invest in a fund that pays 9.25 percent annually, how much will she need to invest today? |
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Definition
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Term
| You want to buy some bonds that will have a value of $1,000 at the end of seven years. The bonds pay 4.5 percent interest annually. How much should you pay for them today? |
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Definition
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Term
| Elizabeth Sweeney wants to accumulate $12,000 by the end of 12 years. If the annual interest rate is 7 percent, how much will she have to invest today to achieve her goal? |
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Definition
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Term
| You are in desperate need of cash and turn to your uncle, who has offered to lend you some money. You decide to borrow $1,300 and agree to pay back $1,500 in two years. Alternatively, you could borrow from your bank that is charging 6.5 percent interest annually. Should you go with your uncle or the bank? |
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Definition
Uncle: 7.42%
$1,500
Bank: 6.5%
$1,474.49
You should borrow from your bank. |
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Term
| You invest $150 in a mutual fund today that pays 9 percent interest annually. How long will it take to double your money? |
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Definition
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Term
| Your finance textbook sold 53,250 copies in its first year. The publishing company expects the sales to grow at a rate of 20 percent each year for the next three years and by 10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in years 3 and 4. Draw a time line to show the sales level for each of the next four years. |
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Definition
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Term
| CelebNav, Inc., had sales last year of $700,000, and the analysts are predicting a good year for the start-up, with sales growing 20 percent a year for the next three years. After that, the sales should grow 11 percent per year for two years, at which time the owners are planning to sell the company. What are the projected sales for the last year before the sale? |
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Definition
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Term
| You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 450 people who will sign up immediately and, through a careful marketing research and analysis, determine that membership can grow by 27 percent in the first two years, 22 percent in year 3, and 18 percent in year 4. How many members do you expect to have at the end of four years? |
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Definition
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Term
Find the present value of $3,500 under each of the following rates and periods:
a. 8.9 percent compounded monthly for five years.
b. 6.6 percent compounded quarterly for eight years.
c. 4.3 percent compounded daily for four years.
d. 5.7 percent compounded continuously for three years |
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Definition
a $2,246.57;
b $2,073.16;
c $2,946.96;
d $2,949.88 |
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Term
| Zephyr Sales Company has sales of $1.125 million. If the company expects its sales to grow at 6.5 percent annually, how long will it be before the company can double its sales? Use a financial calculator to solve this problem. |
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Definition
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Term
| You have $2,500 you want to invest in your classmate's start-up business. You believe the business idea to be great and hope to get $3,700 back at the end of three years. If all goes according to plan, what will be the return on your investment? |
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Definition
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Term
| Patrick Seeley has $2,400 that he is looking to invest. His brother approached him with an investment opportunity that could double his money in four years. What interest rate would the investment have to yield in order for Patrick's brother to deliver on his promise? |
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Definition
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Term
| You have $12,000 in cash. You can deposit it today in a mutual fund earning 8.2 percent semiannually, or you can wait, enjoy some of it, and invest $11,000 in your brother's business in two years. Your brother is promising you a return of at least 10 percent on your investment. Whichever alternative you choose, you will need to cash in at the end of 10 years. Assume your brother is trustworthy and both investments carry the same risk. Which one will you choose? |
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Definition
Option 1: $26,803.77; Option 2: $23,579.48
Mutual Fund |
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