EXERCISE - TIME VALUE OF MONEY

By : Syifa Pramudita Faddila

A. Simple Interest
1. To buy furniture for a new apartment, Candace Cooney borrowed $5000 at 8% simple
interest for 11 month. How much interest will she pay?
2. A loan of $2500 to be repaid in 8 months with interest of 4.3%
3. A loan of $11,280 for 85 days at 7% interest
4. Theresa Cortesinni wants to borrow $8000 from Christine OBrien. She is willing to pay
back $8180 in 6 months. What interest rate will she pay?
B. Compound Interest
1. Suppose $1000 is deposited for 6 years in an account paying 4.25% per year compounded
annually
a. Find the compound amount
b. Find the amount of interest earned
2. Find the amount of interest earned by a deposit of $2450 for 6.5 years at 5.25%
compounded quarterly
C. Future Value of an Annuity
1. Ordinary Annuity
Bethany Ward is an athlete who believes that her playing career will last 7 year. To
prepare for her future, she deposited $22,000 at the end of each year for 7 years in an
account paying 6% compounded annually. How much will she have on deposit after 7
years?
D. Present Value of an Annuity
1. Jake and Wendy are both graduates from University of Singaperbangsa Karawang
(UNSIKA). They both agree to contribute to the endowment fund of Unsika. Jake says
that he will give $500 at the end of each year for 9 years. Wendy prefers to give a lump
sum today. What lump sum can she give that will equal the present value of Jakes annual
gifts, if the endowment fund earns 7.5% compounded annually?