CHAPTER 1 FINANCIAL PLANNING PROBLEMS
1. Ben Collins plans to buy a house for $220,000. If that real estate property is expected to increase in value 3 percent each year, what would its approximate value be seven years from now?
$220,000 x 1.230= $270,600 Total value
5. What would be the yearly earnings for a person with $8,000 in savings at an annual interest rate of 2.5 percent?
$8000 x 0.7445= 5952+8000= $13,952 Total yearly earnings
6. Using time value of money tables, calculate the following:
a. The future value of $450 six years from now at 7 percent.
$450 x 1.501=$675.45
b. The future value of $800 saved each year for 10 years at 8 percent.
$800 x 14.487=$11,589.60
c. The amount that a person would have to deposit today (present value) at a 6 percent interest rate in order to have $1,000 five years from now.
$1000 x .747=$747.26
d. The amount that a person would have to deposit today in order to be able to take out $500 a year for 10 years from an account earning 8 percent.
$500 x 6.710=$3,355.00 would need to be deposited
10. Carla Lopez deposits $3000 a year into her retirement account. If these funds have an average earning of 9% over the 40 years until her retirement, what would be the value of her retirement account?
$3000 x 337.890=1,013,670