Hứa hạnh huyền - 2105000196

1. For liquidity purposes, a client keeps $100,000 in a bank account. The bank
quotes a stated annual interest rate of 7%. How much will your client have in his
account at the end of one year, assuming no additions or withdrawals, using the
following types of compounding:
a. Quarterly
m∗t 4∗1
R 0,07
FV=PV(1+ ) = $100,000¿(1+ ) = ~107,185.90
m 4
b. Monthly
R m∗t 0,07 12∗1
FV=PV(1+ ) = $100,000 ¿(1+ ) = ~107,229
m 12
c. Continuously
FV=PV*e (i∗t ) = $100,000*2,7183(0,07∗1) = ~107,250

2. Jane needs a total of $75,000 in 10 years to pay for the expected college expenses
for her granddaughter. If she can earn 8% on her investments, how much of a lump
sum does Jane need to invest today?
FV $ 75,000
PV= n = 10 = ~34,739.51
( 1+i ) (1+0,08)

3.Rick wants to have $35,000 to buy a new truck at the end of four years. His bank
has a four-year CD paying 4% compounded quarterly. How much does Rick need
to put into the CD now to reach his goal?
FV $ 35,000
PV = R m∗t
= 0,04 4∗4 = ~29,848.74
(1+ ) (1+ )
m 4
4.When Denise retires in 17 years, she wants to have $400,000. If she can earn 6%
on her money, what amount should she invest today to achieve her goal?
FV $ 400,000
PV= n = 17 = ~148,545
( 1+i ) (1+0,06)
5.When Ernie retired, he purchased an annuity that will pay him $6,000 at the
beginning of each year for the next 20 years. If Ernie wanted to earn 7%
compounded annually on his money, how much should Ernie have paid for the
annuity?
FV $ 6,000
PV= n = = $1,550.51
( 1+i ) ( 1+ 0,07 )20
6.Tracy won the lottery and has two choices for receiving her winnings. She can
receive $10,000 at the end of each year for the next 25 years, or she can take a check
for $150,000 today. If Tracy can earn 5% on her money, which option should she
take?
Hứa hạnh huyền - 2105000196

7.Justin wants to buy a car. The seller has given him two choices. He can borrow the
money to pay for the car and pay $200 at the end of each month for the next
21/2years, or he can pay cash today. If Justin earns 12% compounded monthly on
his savings, what’s the most he should pay in cash today?

8.Heather wants to have $20,000 saved up for a down payment on a $100,000 home.
She can earn 4% on her savings account. If she wants to buy the home in 3 years,
what lump-sum amount does she need to deposit today to achieve her goal?
FV $ 29,000
PV= n = = ~$17,779.92
( 1+i ) (1+0,04)3
9.Matthew estimates that he will owe $5,000 in income taxes at the end of one year.
If Matthew can earn 12% compounded monthly, how much should he set aside
today to have enough saved to pay his taxes?
FV $ 5,000
PV = R
m∗t
= 0,12 = ~$4,437.25
12
(1+ ) (1+ )
m 12
10.Caitlin wants to have $85,000 available in 6 years to start her own business. If she
can earn 9% annually on her money, how much does she need to invest today?
FV $ 85,000
PV= n = = ~$50,682.72
( 1+i ) (1+0,09)6
11.Larry wants to buy a bond that will be worth $10,000 at maturity in 7years. The
bond will make $300 semi-annual payments. What’s the maximum price Larry
should pay for the bond if his required return is 8%?

12.Julie deposits $250 on the first of each quartering to an investment account,

which is growing at 8% compounded quarterly. How much will her account be
worth in 10 years?
A
FV= *(1+
i
FV=  250/( 8% : 4 ) x [ ( 1+ 8% :4 )^4x10  - 1 ) ] x ( 1 + 8% : 4 )  = 15402.50571
13.Jamie wants to invest$13,000 for 11 years. If he can earn 8% after tax, how much
will his account be worth?
FV = PV*(1+i)n = $13,000*(1+0,08)11 = ~$30,311.3
14.Deb has $125,000 in her retirement plan at work. She thinks her portfolio will
earn 9% compounded annually in the future. How much will her retirement
account be worth in 15 years?
m∗t 15
R 0,09
FV=PV(1+ ) = $125,000¿(1+ ) = ~$136,735
m 15
Fv= 125000 x ( 1+9% )^15=455310.3075
Hứa hạnh huyền - 2105000196

15.Jim is saving up for his son’s college education. He believes he will need a total of
$90,000 when his son starts college in 5years. If Jim invests $8,000 every six months
(END)in an account earning 6% compounded semi-annually, will he meet his goal
on time?
fv = 8000/ (6%/2) x ( (1 + 6%/2) ^2x5 - 1) = 91711
16.Lila is saving up to start her own part-time business. She currently has $4,000 in
her savings account and deposits $1,200 at the end of each 6 months. If she earns
4% compounded semi-annually on her savings, how much will her account be worth
in 2 years?

17.Keith has $3,000 saved for a down payment on a house. If he adds $500 at the
start of every six months to an account earning 6% compounded semi-annually,
how much will he have in 4 years?

18.Kevin is the beneficiary of a life insurance policy. He has the choice of receiving a
lump sum of $100,000 today, or he can receive $10,000 at the beginning of each year
for 15 years. If he can earn 7% on his money, which option should he take?

19.Diane’s portfolio is worth $22,000 today. If she can earn 11% on her investments,
how much will Diane’s portfolio be worth in 25 years?
FV = PV*(1+i)n = $22,000*(1+0,11)25 = ~$298,880.2
20.Joe owns stock worth $5,000. He invests an additional $600at the end of every six
months in this company. If the value of the stock grows 14% compounded semi-
annually, how much will Joe’s account be worth in 5 years?

21.If an investor wants to earn an annual interest rate of 10.76% on a 26-week T-bill
with a maturity value of $5,000, how much should the investor pay for the bill?
$4744.73
5000=P*(1+10.76%*0.5)
22.How long will it take for a CD to double, if money earns a simple interest rate of
4.8%? Round up nearest year.
20.8=21 years
Hứa hạnh huyền - 2105000196

23.(replace 1st) How much should you deposit initially in an account paying 10%
compound semiannually in order to have $1,000,000 in 30 years
a. Compounded monthly
b. Compounded daily
c. Continuous compounding
a. semi-annual 53,535.52; b. monthly 50,409.83; c. daily 49,807.53; d. continuos
49,707.53
Hứa hạnh huyền - 2105000196

 semi-annual =
53,535.52

24.Find the APY of each. Which is the better investment: 9% compounded monthly
or 9.1% compounded quarterly?
APY 9%, monthly: 9.38%APY 9.1%, quarterly: 9.42%

25.MrKang borrowed $5200 from his friend to pay for remodeling work on his
house. He paid the loan 10 months later with simple interest at 7%. His friend then
invested the proceeds in a 5-year CD paying 6.3% compounded quarterly. How
much will his friend have at the end of the 5 years?
Amount Kang paid back: $5503.33
Final answer: $7522.50