Homework

Assignment:Complete the problems using an Excel spreadsheet. Problem responses must contain all givens, equations, and the process in which the problem is solved. Each student is responsible for completing their own response to the problems.

1. State the present worth of the future payment of $9,450 five years from now at 7% compounded annually.

2. You have $7,450. You would really like that $7,450 to grow into $14,500 in the next five years so you can make a down payment on a new house. What compound interest rate would you need to receive to make your goal possible in five years?

3. Suppose you have the option of receiving either $6,500 at the end of six years or P dollars today. Currently, you have no need for the money, so you could deposit the P dollars into a bank account that pays 11% interest compounded annually. What value of P would make you indifferent in your choice between P dollars today and the promise of $6,500 at the end of six years?

4. State the total amount accumulated by a present investment of $9,000 in five years at 9% compounded annually.

5. Which of the following alternatives would you choose (having the highest value), assuming an interest rate of 10% compounded annually?

a) Receive $2000 today.
b) Receive $3500 three years from now.
c) Receive $4000 six years from now.

6. You deposit $7,000 in a savings account that earns 9% simple interest per year. How many years will it take to double your balance? If, instead, you deposit the $7,000 in another savings account that earns 7% compounded yearly, how many years will it take to double your balance?

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