Mine Planning Exercises

REVIEW QUESTIONS AND EXERCISES

1. What is meant by the term “future worth”?
2. What is meant by the term “present value”?
3. Assume that the interest rate is 5% compounded daily. What would be the equivalent
simple interest rate?
4. If $1000 is placed in a bank savings account earning 5% annually, what is the value
after 10 years?
5. Would you rather have $10,000 today or $20,000 in 5 years? Assume an interest rate
of 8%.
6. Would you rather have $10,000 today or receive payments of $ 1000/year for the next
20 years?
7. What is meant by the term ‘payback period’?
8. If you borrowed $10,000 from the bank today, how long would it require to repay the
loan at $1000/year? Interest rate of 5%.
9. What is meant by the term ‘rate of return’?
10. You invest $1000 today. It will be repaid in 15 equal payments of $200 over a period
of 15 years. What is your rate of return? If you could put the money in a certificate of
deposit paying 5%, what should you do?