Problem 1
$1000 is to be paid annually into a fund for Erica Brown which pays 9% per annum.
(a) What will the available lump sum after 30 years
(b) What would be the available lump sum after 15 years
(c) Based on the term would you expect the 30 year value to be twice the 15 year value? If not why?
Problem 2
Calculate the present value of $15,000 receivable in 2 years at an interest rate of 12% per annum, where interest compounds
(a) Monthly
(b) Quarterly
(c) Annually
Problem 3
$50,000 is invested for a period of 7 years and will return $85,690 at the end of the seventh year. What interest rate is being earnt on this investment?
Problem 4
Billie Brown is borrowing $175,000 to purchase some land at 7% over 10 years (compounded annually). Please prepare a loan schedule to reflect this arrangement and answer the following questions.
(a) What annual instalments must he pay?
(b) What interest will be paid in the fourth instalment?
(c) What will be the principal amount repaid in the fifth instalment?
(d) How much interest in total will be repaid if the loan runs its full term?
(e) If Billie decides to repay the loan in full when the third instalment is due, what amount will be required to pay the loan out, and how much interest will he save?
(f) What is the amount of principal repaid if the loan runs its full term?