Assignment by: Haiqa Malik

Submitted to: Miss Muzammil hanif

Department: business administration

Group: A

Roll number: 2019-BBA-027

Subject: Business Mathematics

Date of submission: 06/07/20

 1. Yousaf deposits $5000 in a savings account at his local bank. The account pays 5.5 %

interest compounded annually. At the end of 6 years, how much will he have in his

account?

Given:

Present value (PV) = $5000

Interest(r) = 5.5%

Future value (FV) =?

n=4

Time (t) = 6 years

Formula:

FV = PV (1+ i) n

Solution:

FV = 5000(1+ 0.055)6

FV = 5000(1.3788)

FV = $6894.21

2. Over the last ten years, Catherine’s deposit to her savings account has grown to $15000. If

she had invested a single amount, made no additional payments and earned 6.4% interest

annually on her deposit, how much did she deposit?

Given:

Future value (FV) = $15000

 Interest (r) = 6.4 %

Time (t) = 10 years

Present value (PV) =?

Formula:

FV = PV (1+ i) n

Solution:

PV = FV/ (1 + i) n

PV = 15000/ (1 + 0.064) 10

PV = 15000/1.859

PV = $8066.3113

3. Irum wishes to retire 25 years. She has decided that she should be able to invest $5000 per

year in her retirement fund. If she makes the payments in quarterly instalments at the

beginning of the each year, and earn an annual percentage rate of 8% on her money how

much she will have at the time of her retirement?

Given:

Payment (PMT) = $5000

Interest(r) = 8 %

Future value (FV) =?

n=4

Time (t) = 25
 Formula:

FV = PMT [{(1+r) n-1} ÷ r

Solution:

FV = 5000[{(1 + 0.08)4 – 1} ÷ 0.08]

FV = 5000[(0.36048896) ÷ 0.08]

FV = $22530.56

4. A mother will make her son’s first $100,000 college tuition fee 12 years from now. How

much will she need to invest today to meet her first tuition goal if the investment is

expected to earn 10% per annum?

Given:

Present value (PV) =?

Interest(r) = 0.010

Future value (FV) = 100,000

n = 12

Formula:

PV = FV [1 / (1 + i) n]

Solution:

PV = 100,000[1/ (1 + 0.1)12]

PV = 100,000 [1/ 3.138]

PV = $31867.43
5. Suppose you want to have $0.5 million saved by the time you reach the age of 30 years

and suppose that you are 20 years old now. If you can earn 5% on your funds, how much

would you have to invest today to reach your goal?

Given:

Present value (PV) =?

Interest(r) = 0.05

Future value (FV) = $ 500,000

n = 10

Formula:

PV = FV [1 / (1 + i) n]

Solution:

PV = 500,000 [1 / (1 + 0.05)10]

PV = $306956.6268

6. The Lucky Loan Company will lend $10000 with terms that require you to pay off the loan

in 36 monthly instalments of $500 each. What is the effective annual interest rate that the

company is charging you?

Given:

Present value (PV) = 10,000

Interest(r) = 3.6007 %

PMT = 500

n = 36
 Formula:

EAR = (i +1) n – 1

Solution:

EAR = (1 + 0.036007)12 -1

EAR = 52.8806 %

7. When you were born, your dear old Aunt Marie promised to deposit $1000 in a savings

account for you on each and every birthdays beginning with your first. The savings account

bears a 5% interest rate compounded annually. You have just turned 25 and want all of your

money. How much is in the account now on your 25th birthday?

Given:

Payment (PMT) = $1000

Interest(r) = 0.05

Future value (FV) =?

n=1

Time (t) = 25

Formula:

FV = PMT [{(1+r) n-1} ÷ r

Solution:

FV = 1000[{(1 + 0.05)25 – 1} ÷ 0.05

FV = 1000[2.3863 ÷ 0.05]

FV = 1000 [47.7270]
FV = $47727.09882