Answer the following questions using the time value of money table:

1. If you deposited some of your savings today into an account that pays 13 percent interest, how long will it take for you to triple your money at a compound interest rate of 13%?

2. Your parents are planning to retire after 10 years. They currently have $100,000 and would like to have $236,700 when they retire. What annual rate of interest would they need to earn on their $100,000 to reach their goal, assuming they save no more money?

3. You are thinking about buying a car, and a local bank is willing to lend you $200,000 to buy it. Under the terms of the loan, it will be fully amortized over 2 years (24 months), and the nominal rate of interest is 12 percent with interest paid monthly.
- A. What would be the monthly payment on the loan?
- B. What would be the effective rate of interest on the loan?

4. Which amount is worth more at 14 percent, compounded annually: $1,000 in hand today, $2,000 due in 6 years, or $5,000 due in 10 years? Explain your answer.

5. While you were a student in college, you borrowed $18,000 in student loans at an interest rate of 3 percent, compounded annually. If you repay $1,500 per year, how long, to the nearest year, will it take you to repay the loan?

6. Your client is 40 years old and wants to begin saving for retirement. You advise the client to put $6,000 a year into the stock market. You estimate that the market’s return will be, on average, 12 percent a year. Assume the investment will be made at the end of each year.
- A. If the client follows your advice, how much will she have by age 65?
- B. If your client wants to have a pension salary by age 65 and forever, how much will the yearly salary be, assuming that the interest rate at that date is 5%?

7. Adams Company bought a piece of land in 1981 for $200,000. By 2005, its value had increased to $1,582,200. Find the annual rate of appreciation during this period.

8. Your employer has promised to give you a $5,000 bonus after you have been working for him for 10 years. What is the present value of this bonus if the proper discount rate is 12%?

9. A downtown bank is advertising that if you deposit $1,000 with them and leave it there for 60 months, you can get $1,801 back at the end of this period. Assuming quarterly base compounding, what is the annual rate of interest paid by the bank?

10. Cincinnati Company has decided to put $30,000 per quarter in a pension fund. The fund will earn interest at the rate of 8% per year, compounded quarterly. Find the amount available in this fund after 10 years.

11. What is the effective interest rate for one dollar invested in the bank at a 9% nominal annual rate compounded daily (use 365 days in a year)?