Rasmussen College Fin1000 Application of Time Value of Money Concepts Question # 00056113 Posted By: jia_andy Updated on: 03/19/2015 11:29 AM Due on: 07/31/2015 Subject Business Topic General Business Tutorials: 1 See full Answer Question Problem 1 - Future Value of InvestmentIf a firm has $250,000 to invest and can earn 8.5%, compounded annually, how much will the firm have after two years?RateNperPMTPVTypeFVProblem 2 - Future Value of Retirement AccountA self-employed person deposits $1,250 annually in a retirement account that earns 5.5%.What will be the account balance at age 62 if the savings program starts when the individual is age 50?RateNperPMTPVTypeFVHow much additional money will be in the account if the saver defers retirement until age 66 and continues the annual contributions until then?Hint: First calculate the FV of the account at age 66 and then subtract the FV determined above (at age 62) to arrive at the additional money saved.RateNperPMTPVTypeFVAdditional money saved if the contributions continue until age 66The first part is a repeat of 1a.How much additional money will be in the account if the saver discontinues the contributions at age 62, but lets it build up until retirement at age 66?Hint: First calculate the FV of the account at age 62, then utilize the FV of the account at age 62 as the PV in the FV calculation for the next 4 years.Finally, subtract the FV of the account at age 62 from the FV of the account with no additional contributions to arrive at the additional money saved.RateNperPMTPVTypeFVRateNperPMTPVTypeFVAdditional money saved if contributions stop at age 62, but the money keeps growing until age 66.Problem 3 - Present Value of Savings AccountA father has decided to set aside a one time lump sum for college that will amount to $60,000 by the timehis 5 year old is 18 years old (13 years). Using 8% as the rate and assuming no further investments will be made,how much must the father invest today in order to have $60,000 in 13 years?RateNperPMTFVTypePVProblem 4 - Home LoanA couple borrows $935,000 for 7 years for the purchase of a vacation home at an interest rate of 7%.The loan requires that the interest and principal be paid in equal, annual payments.The interest is determined on the declining balance that is owed.What are the required annual payments on the loan?RateNperPVFVTypePMT Yearly payment owedHow much is the principal loan balance reduced by during the first year?Hint: To determine the principal paid in year 1, subtract the interest paid in year 1 from the total yearly payment.RatePrincipal loan valueInterest paid in year 1Total payment made in year 1Principal paid the first yearProblem 5 - Lease PaymentsA company leases equipment for 7 years.The equipment costs $28,000 and the owner wants to earn 9.5% on the lease.What should be the required lease payments?RateNperPVFVTypePMT Rating: 4.9/5
Solution: Rasmussen College Fin1000 Application of Time Value of Money Concepts