Note: Some of these problems require the use of the time value of money tables in the chapter appendix, or a financial calculator or spreadsheet software.)
Using the rule of 72, approximate the following amounts. (LO 1.1)
- If the value of land in an area is increasing 6 percent a year, how long will it take for property values to double?
- If you earn 10 percent on your investments, how long will it take for your money to double?
- At an annual interest rate of 5 percent, how long will it take for your savings to double?
- What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 2.5 percent? (LO 1.3)
Using time value of money tables (pg. 35 – Future value of an annuity), calculate the following. (LO 1.3)
- Carla Lopez deposits $3,000 a year into her retirement account. If these funds have an average earning of 8 percent over the 40 years until her retirement, what will be the value of her retirement account? (LO 1.3)
- . If a person spends $10 a week on coffee (assume $500 a year), what would be the future value of that amount over 10 years if the funds were deposited in an account earning 3 percent? (LO 1.3)