1/ $100 invested for 10 years at 12% interest is worth more in FV terms than $200 invested for 10 years at 4% interest.

$310.58 $14.54
$296.05

2/ Shawn wants to buy a new telescope. He estimates that it will take him one year to save the money and that the telescope will cost $200. At an interest rate of 6%, h
need to set aside today to purchase the telescope in one year?

$99.39

3/ Johnny and Darren both earn $100 working on their respective neighbors' big farms. Johnny puts his $100 in the piggy bank that his parents gave him to encourage h
his money in a savings account his parents set up for him. The savings account pays 3% interest. They both take their money out after 5 years. How much more money
Johnny?

$115.93 $15.93

4/ Your dad invested $25 for you in 1942 in a fund and you have not withdrawn any money since.If the fund has averaged a return of 8 percent over the last 70 years,
of that investment?

5/ Bridgette’s grandparents opened a savings account for her and placed $500 in the account. The account pays 3.5% interest. Bridgette wants to be a singer and she h
new karaoke machine. The machine costs $150. How much less will the account be worth in 8 years if she buys the karaoke machine now versus leaving the account

$592.56

6/ Juan has $100,000 to invest and he has narrowed down his decision to two investments. Option A returns 60% annually for 4 years, but the maximum investment h
returns 12% annually for 4 years and would require the entire $100,000. Which option produces the best result for Juan and what is the benefit over the lesser option?
invested in Option A would be placed in a safe deposit box earning no interest.
7/ Ralph knows that he is going to have to replace his roof soon. If he has the roof replaced now, it will cost $10,000. He could wait 5 years, but it will then cost him $
these options cost the same.

14.87%

8/ Rondo is in the market for a new car. He has narrowed his search down to 2 models. Model A costs $32,000 and Model B costs $28,000. With both cars he plans to
trading in for a new car. His research indicates that the trade in value for Model A after 4 years is 60% of the initial purchase price, while the trade in value for Model
simplicity assume that operating and maintenance costs for the models are identical. Which model is the better decision and how much "cheaper" is it than the alterna

9/ College tuition has been rising at a rate of 7% per year. Currently the average tuition of a state college is $9,500/year. Andrea’s son Trevor will begin college in 12
annually. How much does Andrea need to have set aside today/now to pay for 4 years of college for Trevor? (Note:Tuition will continue to change annually and And
accrue interest while Trevor is in school. Also, tuition is due at the beginning of each year.)

10/ Christine is a new homebuyer. She wants to make sure that she incorporates the cost of maintenance into her decision. She estimates that routine repairs and main
will be $1,590 in the first year (one year from now). Due to the increasing age of the home, she expects that maintenance costs will increase 6% annually. The intere
home for 10 years, what is the present value of all future maintenance? (Note that maintenance costs will change annually, and starts one year from now and she plan
house.)
10/ Christine is a new homebuyer. She wants to make sure that she incorporates the cost of maintenance into her decision. She estimates that routine repairs and main
will be $1,590 in the first year (one year from now). Due to the increasing age of the home, she expects that maintenance costs will increase 6% annually. The intere
home for 10 years, what is the present value of all future maintenance? (Note that maintenance costs will change annually, and starts one year from now and she plan
house.)
0. At an interest rate of 6%, how much does Shawn

ents gave him to encourage him to save. Darren puts

ars. How much more money does Darren have than

ercent over the last 70 years, what is the current value

wants to be a singer and she has her heart set on a

w versus leaving the account untouched?

t the maximum investment he can make is $10,000. Option B

enefit over the lesser option? Assume that the $90,000 not
ars, but it will then cost him $20,000. At what rate will

00. With both cars he plans to pay cash and own them for 4 years before
the trade in value for Model B is 45%. The interest rate is 5%. For
cheaper" is it than the alternative?

revor will begin college in 12 years. Andrea’s portfolio is making 5%

to change annually and Andrea’s portfolio balance will continue to

that routine repairs and maintenance on the home she is considering

ease 6% annually. The interest rate is 5%. If she plans to be in the
e year from now and she plans to do the last one before selling her
 that routine repairs and maintenance on the home she is considering
ease 6% annually. The interest rate is 5%. If she plans to be in the
e year from now and she plans to do the last one before selling her
1/ Qin deposits his first paycheck in the bank. The annual interest rate is 12%, but interest is compounded quarterly. Th

2/ Gloria is 35 and trying to plan for retirement. She has put a budget together and plans to save $4,800 per year, starti
make 7% on her account. How much will she have for retirement at age 65?

3/ Mohammad has just turned 21 and now has access to the money his parents have been putting away in an account f
is worth given that they have invested $1,000 every year in the account starting on his 5th birthday and have just made
Mohammad’s account worth today?

4/ Marcel has just graduated from college and has found a job that will pay him $25,000 per year at the end of each y
an MBA after gaining 5 years experience anyway. What is the value today of his 5-year salary assuming that the inter

5/ Rachna is considering a life insurance plan that will require her to pay a premium of $200 every year for the next 4
put away a lump sum today in her bank to cover all future payments. How much would she need to deposit in her ban

6/ Roxanne is in the market for a new house, and she has found a house she likes that is selling for $250,000. The do
in cash) and Roxanne plans to finance the remainder with a fixed rate mortgage. The annual rate is 6% and the mort
Roxanne's first and 5th monthly payment? ( Read the sheet ExcelFunction first)

7/ Abebi, who has just celebrated her 29th birthday, will retire on her 55th birthday, and she has just set up a retirem
19 more years. Abebi's goal is to receive $120,000 for each of these twenty years. In creating her retirement account
25 years starting on her 30th birthday. If the annual interest rate is 9%, how big should Abebi's equal payments be?

$21,411.71 $1,034,769.68
8/ Two years ago Abilia purchased a $10,000 car; she paid $2000 down and borrowed the rest. She took a fixed rate
during the last two years and she can refinance her car by borrowing the amount she still owes on the car at a new f
she save per month for the next three years if she decides to refinance?

9/ You have been living in the house you bought 10 years ago for $300,000. At that time, you took out a loan for 8
just paid off the 120th monthly payment. Interest rates have meanwhile dropped steadily to 6% per year, and you th
to refinance your loan is $4,000. Should you refinance the remaining balance? How much would you save/lose if y

10/ You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases
cash rebate from Dealer A. The price of the car is $15,000. (ii) Lease the car from Dealer B. Under this option, yo
$200 payment occurs 1 month from today). After 36 months you may buy the car for $8,000. (iii) Purchase the car
interest 36-month loan with monthly payments. The car price is $15,000. Suppose the market interest rate is 6%. W
 terest is compounded quarterly. The EAR (Effective Annual Rate) is:

lans to save $4,800 per year, starting at the end of this year, in a retirement fund until she is 65. Assume that she can

been putting away in an account for him since he was 5 years old. His mother has asked him to guess what his account
his 5th birthday and have just made one. The interest rate on the account has been 3.5% annually. How much is

5,000 per year at the end of each year, but the job is only for 5 years. He is not worried about that because he plans to do
year salary assuming that the interest rate is 3%?

m of $200 every year for the next 40 years. She wants to make sure that she is able to make this payment and wants to
ould she need to deposit in her bank if the annual interest rate on her deposit account is 4%?

that is selling for $250,000. The down payment on the house is 20% (the amount that the bank should require you to pay
The annual rate is 6% and the mortgage is for 15 years, though payments are monthly. What is the interest component of

y, and she has just set up a retirement plan to pay her income starting on her retirement day, and to continue paying for
In creating her retirement account, Abebi has committed to set aside equal payments at the end of each year, for the next
hould Abebi's equal payments be?
owed the rest. She took a fixed rate 60-month installment loan at a stated rate of 8% per year. Interest rates have fallen
she still owes on the car at a new fixed rate of 6% per year for 3 years. Should Abilia refinance her loan? How much will

hat time, you took out a loan for 80% of the house at a fixed rate 15-year loan at an annual stated rate of 9%. You have
steadily to 6% per year, and you think it is finally time to refinance the remaining balance. But there is a catch. The fee
ow much would you save/lose if you decided to refinance?

ng your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,500
m Dealer B. Under this option, you pay the dealer $500 now and $200 a month for each of the next 36 months (the first
ar for $8,000. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero
se the market interest rate is 6%. What is the net cost today of the cheapest option?
account

ans to do

ants to

ying for
r the next
 fallen
much will
 Take out $100,000 in a loan at Inerest Rate 10%, yearly payments, 5 years to pay back
Loan Amortization
Beginning Yearly Principal
Year Interest Yearly Payment = Interest + Principal Repayment
Balance Payment Repayment
1 $100,000.00 ($26,379.75) ($10,000.00) ($16,379.75)
2 $83,620.25 ($26,379.75) ($8,362.03) ($18,017.72)
3 $65,602.53 ($26,379.75) ($6,560.25) ($19,819.50)
4 $45,783.03 ($26,379.75) ($4,578.30) ($21,801.44)
5 $23,981.59 ($26,379.75) ($2,398.16) ($23,981.59)

CUMPRINC ($59,638.66) =E5+E6+E7

($19,819.50) =E6

CUMIPMT ($19,500.58) =D5+D6+D7

($6,560.25) =D6

Take out $100,000 in a loan at Inerest Rate 10%, monthly payments, 12 months to pay back
Loan Amortization
Year Beginning Monthly Principal FV of monthly
Interest
Balance Payment Repayment payment
1 $100,000.00 ($8,791.59) ($833.33) ($7,958.26) $9,631.92
2 $92,041.74 ($8,791.59) ($767.01) ($8,024.57) $9,552.31
3 $84,017.17 ($8,791.59) ($700.14) ($8,091.45) $9,473.37
4 $75,925.72 ($8,791.59) ($632.71) ($8,158.87) $9,395.08
5 $67,766.85 ($8,791.59) ($564.72) ($8,226.86) $9,317.43
6 $59,539.99 ($8,791.59) ($496.17) ($8,295.42) $9,240.43
7 $51,244.56 ($8,791.59) ($427.04) ($8,364.55) $9,164.06
8 $42,880.01 ($8,791.59) ($357.33) ($8,434.26) $9,088.33
9 $34,445.76 ($8,791.59) ($287.05) ($8,504.54) $9,013.22
10 $25,941.22 ($8,791.59) ($216.18) ($8,575.41) $8,938.73
11 $17,365.80 ($8,791.59) ($144.72) ($8,646.87) $8,864.85
12 $8,718.93 ($8,791.59) ($72.66) ($8,718.93) $8,791.59
 CUMPRINC ($32,501.76) =SUM(E20:E23)

CUMIPMT ($2,664.60) =SUM(D20:D23)

Effective Annual Rate (EAR) 10.47%

Loan (principal) + Interest $110,471.31 =B19*(1+D36) =SUM(G19:G30)
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