Exam 5: Time Value of Money 2: Analyzing Annuity Cash Flows

Sally saves $500 per month in her retirement plan.She plans on making monthly contributions for 35 years.If her account earns a 12 percent annual interest rate,how much will she have at the end of 35 years and what percent of the total are her out-of-pocket contributions?

Given a 10 percent interest rate,compute the year 9 future value if deposits of $10,000 and $20,000 are made in years 1 and 5 respectively,and a withdrawal of $5,000 is made in year 7.

Chase purchased a $30,000 car three years ago using a 10 percent,5-year car loan.He has decided that he would sell the car now if he could get a price that would pay off the balance of his loan.What is the minimum price Chase would need to receive for his car? (Assume monthly payments.)

People refinance their home mortgages

When interest rates are lower,borrowers can

Which of the following will increase the present value of an annuity?

The length of time of the annuity is very important in accumulating wealth within an annuity.What other factor also has this effect?

Phoebe realizes that she has charged too much on her credit card and has racked up $7,000 in debt.If she can pay $200 each month and the card charges 17 percent APR (compounded monthly),how long will it take her to pay off the debt?

The simple form of an annualized interest rate is called the annual percentage rate (APR).The effective annual rate (EAR)is a

Your company borrows $75,000 today to fund its growth initiatives.It must repay the bank in four annual payments of $26,600 at the end of each year.What annual interest rate is your firm paying?

A mortgage broker is offering a $225,000 30-year mortgage with a teaser rate.In the first two years of the mortgage,the borrower makes monthly payments on only a 2.5 percent APR interest rate.After the second year,the mortgage interest rate charged increases to 8.5 percent APR.What are the mortgage payments in the first two years? What are the mortgage payments after the second year?

If you start making $100 monthly contributions today and continue them for five years,what is their future value if the compounding rate is 10 percent APR? What is the present value of this annuity?

Given a 7 percent interest rate,compute the year 6 future value if deposits of $2,500 and $1,500 are made in years 2 and 3,respectively,and a withdrawal of $900 is made in year 4.

Say that you purchase a house for $150,000 by getting a mortgage for $135,000 and paying a $15,000 down payment.Assume you get a 15-year mortgage with a 6 percent interest rate.If the house appreciates at a 2 percent rate per year,what will be the value of the house in seven years? How much of this value is equity?

When saving for future expenditures,we can add the ________ of contributions over time to see what the total will be worth at some point in time.

Jasmine has decided that she wants to build enough retirement wealth that,if invested at 6 percent per year,will provide her with $3,000 of monthly income for 30 years.To date,she has saved nothing but she still has 25 years until she retires.Jasmine believes that she can earn 6 percent on her investments until she retires.How much money does she need to contribute per month to reach her goal?

Given a 5 percent interest rate,compute the present value of deposits made in years 1,2,3,and 4 of $1,000,$1,400,$1,400,and $1,500.

A car company is offering a choice of deals.You can receive $2,000 cash back on the purchase,or a 2 percent APR,3-year loan.The price of the car is $17,000 and you could obtain a 3-year loan from your credit union,at 7 percent APR.Which deal is cheaper?

When computing the future value of an annuity,the higher the compound frequency

When moving from the left to the right of a time line,we are using