1. You deposit $10,000 to open a savings account today. The bank
pays an effective interest rate of 12 percent per year on deposits.  No
other deposits or withdrawals will be made to this account.  How much
interest will your account earn after 25 years?

2. You borrow $15,000 to buy a
car at an effective interest rate of 1% per month.  The loan is to be
repaid in equal payments at the end of each month over the next five
years.  How much is your monthly car payment?

3.
Equal end-of-the-year payments of $263.80 each are being made on
a $1,000 loan at an effective interest rate of 10% per
year. How many payments are required to repay the entire loan?

4.
Peter has invested $48,000 in a new excavator that is expected to
produce a return of $6,600 per year for the
next 12 years. At a 8% annual interest rate, is
this investment worthwhile?

5. In 1916, Ryan’s family sold
a land to the United States for $0.06 per acre. In 2016, the average value of
an acre at this location is $24,000. What annual compounded percentage increase
in value of an acre of land has been experienced?

6. What is the future
equivalent of $2,500 invested at 8% simple interest per year for 6 years?

7. Julian wants to triple his
money at an interest rate of 8% per year compounded annually. And so, for how
many years would he have to leave the money in the account?

8. Peter, a project engineer,
calculated that monthly payments of $P are required to pay off a $8,000 loan
for n years at i% interest, compounded annually. If Peter decides to borrow
$16,000 instead with the same n and i%, his monthly payments will be $2P.

9. In 1906, first-class postage
for a one-ounce letter cost $0.03. The same postage in 2016 cost $0.52. What
compounded annual increase in the cost of first-class postage has been
experienced over this period of time?

10.
Analyze the case of Jennifer, who was overhead gloating (for all to
hear) about how well she had done with her investment funds.

“I invested $2,000 per year for
30 years and turned it into $112,170!” she tells everyone she
can. Based on this information, what
interest rate did Jennifer earn?

11. Thomas makes ten annual
deposits of $3,000 in a saving account that pays interest at a rate of 6% per
year. One year after making the last deposit, the interest rate changes to 8%
per year. Ten years after the last deposit, the accumulated money is withdrawn
from the account. How much money is withdrawn?

12. You made an arrangement to
borrow $2,500 now and another $2,500 two years from now. The entire obligation
is to be repaid at the end of four years. If the projected interest rates in
years one, two, three, and four are 8%, 8%, 10%, and 12% respectively, how much
will be repaid as a lump-sum amount at the end of four years?

13.
An engineer can save up to $30,000 per year in
a 401(k) retirement account. If her starting balance at
age 40 is $100,000, and she saves the full amount available
to her from age40 to 60, how much money will she have saved when she
is 60 years old (after 20 years of saving)? The
interest rate is 8% per year.

14. If Henry invests $10,000
four years from now, how much will be in the account 20 years from now if i =
12% compounded annually?

15. Suppose you want to take
over a construction firm. Your offer for that company is $5,000,000 in cash
upon signing the agreement followed by 15 annual payments of $500,000 starting
one year later. The time value of money is 8%. What is the present worth of your
offer?

16.
You take out a loan for $15,000 for 5 years
at 2% interest per month. How much will your monthly payments
be?

17.
Your firm purchases a machine with maintenance costs of $250 per year
starting in year 1. The maintenance costs then increase
by $250 per year starting in year 2. The machine is
expected to have a useful life of 15 years. If the interest rate
is 10%, how much money should your firm put aside now to cover these
costs?

18.
You invest $2,000 at an interest rate
of 7% for 27 years. What is the value of this
investment at the end of 27 years?

19.
You invest $1,000 in your first year of your career, and then
increase your investments by $500 per year for the
next 40 years. If you can expect a return of 6% per
year, how much money will your investment be worth at the end
of 40 years? Choose the closest answer.

20. Your firm purchases a
machine for $200,000. The machine will produce $40,000 revenue for each
year for 5 years. Then after 5 years it will be sold for
$50,000. Annual expenses are $10,000. Find the present value at 6%
annual interest.