Chapter 6 Calculations

question

Assume ABC Company deposits $70,000 with First National Bank in an account earning interest at 6% per annum, compounded semi-annually. How much will ABC have in the account after five years if interest is reinvested?
answer

94,070 70,000×1.34392=94070
question

Charlie Corp. is purchasing new equipment with a cash cost of $250,000 for an assembly line. The manufacturer has offered to accept $57,400 payment at the end of each of the next six years. How much interest will Charlie Corp. pay over the term of the loan?
answer

94,400 (54,400 x 6)-250,000
question

If a savings account pays interest at 4% compounded quarterly, then the amount of $1 left on deposit for 5 years would be found in a table using
answer

1% 4×5=20; 4%/4= 1%
question

If an individual deposits $8,000 in a savings account today, what amount of cash would be available two years from today?
answer

$8,000 ÷ 0.826
question

What is the present value today of $9,000 to be received six years from today?
answer

$9,000 × 0.621 × 0.909
question

What amount should be deposited in a bank today to grow to $6,000 three years from today?
answer

$6,000 × 0.751
question

What amount should an individual have in a bank account today before withdrawal if $7,000 is needed each year for four years with the first withdrawal to be made today and each subsequent withdrawal at one-year intervals? (The balance in the bank account should be zero after the fourth withdrawal.)
answer

$7,000 + ($7,000 × 0.909) + ($7,000 × 0.826) + ($7,000 × 0.751)
question

At the end of two years, what will be the balance in a savings account paying 6% annually if $15,000 is deposited today? The future value of one at 6% for one period is 1.06.
answer

16,854 15,000 x (1.06)^2
question

Mordica Company will receive $300,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $300,000 receipt is
answer

$153,948. 300,000x .51316
question

Dunston Company will receive $300,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $153,948. In how many years is the $300,000 received?
answer

7 years
question

Milner Company will invest $500,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is
answer

$669,115.
question

Barber Company will receive $900,000 in 7 years. If the appropriate interest rate is 10%, the present value of the $900,000 receipt is
answer

$461,844.
question

Barkley Company will receive $400,000 in a future year. If the future receipt is discounted at an interest rate of 8%, its present value is $252,068. In how many years is the $400,000 received?
answer

6 years
question

Altman Company will invest $700,000 today. The investment will earn 6% for 5 years, with no funds withdrawn. In 5 years, the amount in the investment fund is
answer

$936,761.
question

John Jones won a lottery that will pay him $3,000,000 after twenty years. Assuming an appropriate interest rate is 5% compounded annually, what is the present value of this amount?
answer

$1,130,670.
question

Angie invested $150,000 she received from her grandmother today in a fund that is expected to earn 10% per annum. To what amount should the investment grow in five years if interest is compounded semi-annually?
answer

$244,335.
question

Bella requires $160,000 in four years to purchase a new home. What amount must be invested today in an investment that earns 6% interest, compounded annually?
answer

$126,734.
question

What interest rate (the nearest percent) must Charlie earn on a $226,000 investment today so that he will have $570,000 after 12 years?
answer

8%.
question

Ethan has $160,000 to invest today at an annual interest rate of 4%. Approximately how many years will it take before the investment grows to $324,000?
answer

18 years.
question

Jane wants to set aside funds to take an around the world cruise in four years. Assuming that Jane has $12,000 to invest today in an account expected to earn 6% per annum, how much will she have to spend on her vacation?
answer

$15,150.
question

Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per annum on an investment, how much will she have to set aside today so that she will have sufficient funds available?
answer

$8,820.
question

What would you pay for an investment that pays you $2,500,000 after forty years? Assume that the relevant interest rate for this type of investment is 6%.
answer

$243,050.
question

What would you pay for an investment that pays you $30,000 at the end of each year for the next ten years and then returns a maturity value of $450,000 after ten years? Assume that the relevant interest rate for this type of investment is 8%.
answer

$409,737.
question

Anna has $15,000 to invest. She requires $25,000 for a down payment for a house. If she is able to invest at 6%, how many years will it be before she will accumulate the desired balance?
answer

9 years.
question

Lucy and Fred want to begin saving for their baby’s college education. They estimate that they will need $150,000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education?
answer

$4,579.
question

Lucy and Fred want to begin saving for their baby’s college education. They estimate that they will need $100,000 in eighteen years. If they are able to earn 5% per annum, how much must be deposited at the end of each of the next eighteen years to fund the education?
answer

$3,555.
question

Jane wants to set aside funds to take an around the world cruise in four years. Jane expects that she will need $12,000 for her dream vacation. If she is able to earn 8% per annum on an investment, how much will she need to set aside at the beginning of each year to accumulate sufficient funds?Pearson Corporation makes an investment today (January 1, 2014). They will receive $9,000 every December 31st for the next six years (2014 – 2019). If Pearson wants to earn 12% on the investment, what is the most they should invest on January 1, 2014?
answer

$2,466.
question

Garretson Corporation will receive $10,000 today (January 1, 2014), and also on each January 1st for the next five years (2015 – 2019). What is the present value of the six $10,000 receipts, assuming a 12% interest rate?
answer

$46,048.
question

Spencer Corporation will invest $20,000 every December 31st for the next six years (2014 – 2019). If Spencer will earn 12% on the investment, what amount will be in the investment fund on December 31, 2019?
answer

$162,304.
question

Tipson Corporation will invest $20,000 every January 1st for the next six years (2014 – 2019). If Tipson will earn 12% on the investment, what amount will be in the investment fund on December 31, 2019?
answer

$181,780.
question

Hiller Corporation makes an investment today (January 1, 2014). They will receive $50,000 every December 31st for the next six years (2014 – 2019). If Hiller wants to earn 12% on the investment, what is the most they should invest on January 1, 2014?
answer

$205,571.

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