# Time Value of Money

1. What interest rate would allow you to accumulate $10,000 in 8 years if you saved $60 per month and earned compounded interest monthly?

2. What amount of money should you pay each month to retire a $12,000 debt in five years if the interest rate on money owed is 10%?

3. If the equivalent annual interest rate is 15% what is the monthly rate that would be compounded to achieve this?

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#### Solution Preview

1. What interest rate would allow you to accumulate $10,000 in 8 years if you saved $60 per month and earned compounded interest monthly?

no of years= 8

no of months= 96 =12x8

Monthly amount = $60

Total amount= $10,000

FVIFA (Future Value Interest Factor for an annuity) x Monthly amount ($60)= $10,000

Therefore FVIFA= 166.67 =10000/60

From the tables

for n= 96 and ...

#### Solution Summary

Answers to questions on Time Value of Money dealing with Interest Rate, Amount paid to retire debt, monthly interest rate