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Some of these problems require the use of the time value of money




Problem Set 1;(Note: Some of these problems require the use of the time value of money tables in;the Chapter 1 Appendix).;1. Ben Collins plans to buy a house for $65,000. If that real estate property is;expected to increase in value 5 percent each year, what would its approximate;value be seven years from now?;2. At an annual interest rate of five percent, how long would it take for your;savings to double?;3. In the mid-1990s, selected automobiles had an average cost of $12,000. The;average cost of those same motor vehicles is now $20,000. What was the rate of;increase for this item between the two time periods?;4. A family spends $28,000 a year for living expenses. If prices increase by 4;percent a year for the next three years, what amount will the family need for its;living expenses?;5. What would be the yearly earnings for a person with $6,000 in savings at an;annual interest rate of 5.5 percent?;6. Elaine Romberg prepares her own income tax return each year. A tax preparer;would charge her $60 for this service. Over a period of 10 years, how much does;Elaine gain from preparing her own tax return? Assumes she can earn 3 percent;on her savings.;7. Tran Lee plans to set aside $1,800 a year for the next six years, earning 4;percent. What would be the future value of this savings amount?;8. If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal;payments at the end of the next five years, what would be the amount of each;payment? (Note: Use the present value of an annuity table in the;Chapter 1 Appendix.);9.;Based on the following data, compute the total assets, total liabilities, and net;worth.;Liquid assets, $3,670;Household assets, $89,890;Investment assets, $8,340;Long-term liabilities, $76,230;Current liabilities, $2,670;10. Which of the following employee benefits has the greater value? Use the formula;given in the Financial Planning Calculations Tax-Equivalent Employee;Benefits box found in Chapter 2 to compare these benefits. (Assume a 28;percent tax rate.);A nontaxable pension contribution of $4,300 or the use of a company car with a;taxable value of $6,325.


Paper#28303 | Written in 18-Jul-2015

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