1. Suppose you are planning to purchase a new car, 5 years from today, at an exp

Question

1. Suppose you are planning to purchase a new car, 5 years from today, at an expected price of 28,000 dollars, how many dollars do you need to put into an account today, if the annual interest rate to be paid on the account is 8.0 percent per year?

2. Suppose that you deposit 25 dollars in an account that pays 10.0 percent per year. How much will be in that account at the end of 30 years, if interest is compounded annually?

3. Suppose that you have an outstanding balance of $425 on your credit card. The credit card company charges a rate of 35.0% per year and interest is compounded monthly. If you do not make any payments, how much will you owe at the end of 3 years?

4. You have a dream of owning a Lamborghini. Towards that goal, you begin saving today, by opening an account that pays 15 percent per year, compounded monthly. If you intend to have $85,000 saved in this account by the time of purchase, 25 years from today, how much do you need to deposit as a single lump sum in the account today?

5. Ariana wants to go on a vacation to Bahia, Brazil. The anticipated cost of the trip will be $4,000. i) If she puts $3,500 into a special savings account today, that pays 14.0% interest compounded annually, how many years will it take before she has enough money for the trip? ii) How many years will it take if interest is compounded daily?

Explanation / Answer

a) fv=pv(1+r)

28000=pv(1+8

pv=28000/9

=3111

b)100$ s.i

c)871.25

d)16150

e)

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