Finance 100 Finance100

Chapter 9

P1. Find the future value one year from now of a $7,000

investment at a 3 percent annual compound interest rate. Also

calculate the future value if the investment is made for two

years.

P2. Find the future value of $10,000 invested now after

five years if the annual interest rate is 8 percent.

What would be the future value if the interest rate is a simple

interest rate?

What would be the future value if the interest rate is a

compound interest rate?

P3. Determine the future values if $5,000 is invested in

each of the following situations:

5 percent for ten years.

7 percent for seven years.

9 percent for four years.

P4. You are planning to invest $2,500 today for three

years at a nominal interest rate of 9 percent with annual

compounding.

What would be the future value of your investment?

Now assume that inflation is expected to be 3 percent per year

over the same three-year period. What would be the

investmentâ€™s future value in terms of purchasing power?

What would be the investmentâ€™s future value in terms of

purchasing power if inflation occurs at a 9 percent annual

rate?

Learning Extension Chapter 9

1. Assume you are planning to invest $100 each year for

four years and will earn 10 percent per year. Determine the future

value of this annuity due problem if your first $100 is invested

now.

2. Assume you are planning to invest $5,000 each year for six

years and will earn 10 percent per year. Determine the future value

of this annuity due problem if your first $5,000 is invested

now.

3. What is the percent value of a five year lease arrangement

with an interest rate of 9 percent that requires annual payments of

$10,000 per year with the first payment being due now?

4. Use financial calculator to solve for the interest rate

involved in the following future value of an annuity due problem.

The future value is $57,000, the annual payment is $7,500, and the

time period is six years.

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