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Time value of money

? Annsley deposits $1,000 today into a savings account that pays 3% annual interest. How much will she have in 15 years with annual compounding?

? What is the present value of $20,000 to be received in 30 years if the appropriate discount rate is 9%?

? How do we determine the appropriate discount rate to use when computing the present value of a certain amount of cash to be received at a certain future point in time?

? For a 4-year car loan in the amount of $35,000 with an annual interest rate of 6% and monthly payments, what will be the remaining balance on the loan immediately after the first month's payment is made?

? Suppose you invest $3,000 per year into an IRA every year for 25 years beginning today. If you earn 7% per year on your investments, what will be the value of your IRA in 25 years?

? Suppose you want to have $2,000,000 when you retire in 30 years. Assume you will earn 8% per year on your investments. How much would you have to invest at the end of each year for the next 30 years to reach your $2,000,000 goal?

Solution Summary

The solution explains various questions relating to annual compounding, PV, discount rate, FV, annuity and payment amount