a. How much would you have to deposit today if you wanted to have $60,000 in four years? Annual interest rate is 9%.
b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how much would you have to deposit today to have $15,000 when you graduate?
c. Would you rather have $463 now or $1,000 ten years from now? Assume that you can earn 9% on your investments.
d. Assume that a college parking sticker today costs $90. If the cost of parking is increasing at the rate of 5% per year, how much will the college parking sticker cost in eight years?
e. Assume that the average price of a new home is $158,500. If new homes are increasing at a rate of 10% per year, how much will a new home cost in eight years?
f. An investment will pay you $10,000 in 10 years, and it will also pay you $400 at the end of each of the next 10 years (years 1 thru 10). If the annual interest rate is 6%, how much would you be willing to pay today for this type of investment?
g. A college student is reported in the newspaper as having won $10,000,000 in the Kansas State Lottery. However, as is often the custom with lotteries, she does not actually receive the entire $10 million now. Instead she will receive $500,000 at the end of the year for each of the next 20 years. If the annual interest rate is 6%, what is the present value (today’s amount) that she won? (Ignore taxes.)
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