FIN 303 Professor Dow TVM Problem Set 2 1 You are investing 500 today How much will you have in 8 years if you earn 6 per year 2 What is the present value of 20 000 paid 6 years from now discounting at a rate of 12 3 You will be saving 2 000 per year an interest rate of 6 How much will you have after 10 years 4 You want to have 20 000 5 years from now How much must you save each year if the interest rate is 6 5 You can save 4 000 each year If you want to have 40 000 after 6 years what interest rate would you need to earn 6 You can save 4 000 each year If you want to have 40 000 and can invest at an interest rate of 14 how long will it take you 7 You are given a gift of 10 000 which you put in the bank and earn an interest rate of 2 compounded semi annually How much will you have after 6 years 8 You are getting a 30 year mortgage at an interest rate of 6 per year If you borrow 300 000 what will be your monthly payment 9 You are getting a 30 year mortgage at an interest rate of 6 per year If you can pay 2 000 per month what is the most you can borrow 10 You can save 200 per month If you earn 12 per year compounded monthly how much will have after 8 years 11 If you earn 12 per year compounded monthly and you want to have 40 000 after 8 years how much must you save per month 12 If you can save 200 per month and want 40 000 after 8 years what annual interest rate compounded monthly do you need to earn 13 If you can save 200 per month and want 40 000 and earn an annual interest rate of 12 compounded monthly how long would it take in years 14 You have a 4 year auto loan at 18 per year compounded monthly If you want to borrow 20 000 what would be your monthly payments Assume that payments are made at the start of the month 15 You are planning on working and saving for 30 years at which point you ll live off your savings while you are retired Assume that you earn 3 compounded monthly on your investments when you are retired and 6 compounded monthly when you are working If you plan on being retired for 20 years and need 4 000 per month when retired how much must you save each month when you are working Answers Answers in bold Negative answers converted to positive numbers 1 n 8 i 6 pv 500 pmt 0 fv 796 92 2 n 6 i 12 pv 10 132 62 pmt 0 fv 20 000 3 n 10 i 6 pv 0 pmt 2 000 fv 26 361 59 4 n 5 i 6 pv 0 pmt 3 547 93 fv 20 000 5 n 6 i 20 28 pv 0 pmt 4 000 fv 40 000 6 n 6 68 i 14 pv 0 pmt 4 000 fv 40 000 7 n 12 i 1 pv 10 000 pmt 0 fv 11 268 25 8 n 360 i 0 5 pv 300 000 pmt 1 798 65 fv 0 9 n 360 i 0 5 pv 333 583 23 pmt 2 000 fv 0 10 n 96 i 1 pv 0 pmt 200 fv 31 985 46 11 n 96 i 1 pv 0 pmt 250 11 fv 40 000 12 n 96 i 1 40 pv 0 pmt 200 fv 40 000 13 n 110 41 i 1 pv 0 pmt 200 fv 40 000 14 n 48 i 1 5 pv 20 000 pmt 578 82 fv 0 15 n 240 i 0 25 pv 721 243 66 pmt 4 000 fv 0 n 360 i 0 5 pv 0 pmt 718 00 fv 721 243 66 110 41 12 9 2 1 4 12 16 81 Note the is annuity due so you need to set your calculator to begin