Mr. Blochirt is creating a college investment fund for his daughter. He will put in $1,000 per year

Mr. Blochirt is creating a college investment fund for his daughter. He will put in $1,000 per year for the next 15 years and expects to earn a 6% annual rate of return. How much money will his daughter have when she starts college?

A. $11,250
B. $12,263
C. $24,003
D. $23,276

FV_A = A ´FV_IFA (App. C: 6%, 15 periods)
= $1,000 ´ 23.276 = $23,276

Mr. Nailor invests $5,000 in a money market account at his local bank. He receives annual interest of 8% for 7 years. How much return will his investment earn during this time period?

A. $2,915
B. $3,570
C. $6,254
D. $8,570

FV = PV x FV_IF (App. A: 8%, 7 periods)
= $5,000 x 1.714 = $8,570
$8,570 - initial investment of $5,000 = $3,570

Lou Lewis borrows $10,000 to be repaid over 10 years at 9 percent. Repayment of principal in the first year is:
A. $1,558
B. $658
C. $742
D. $885

A = $10,000
6.418
A = $1,558 annual payment less interest in year 1 ($10,000 x 9%) = $658

Sharon Smith will receive $1 million in 50 years. The discount rate is 14%. As an alternative, she can receive $1,000 today. Which should she choose?
A. the $1 million dollars in 50 years.
B. $2,000 today.
C. she should be indifferent.
D. need more information.

(App. B: 14%, 50 periods)
= $1,000,000 x 0.001 = $1,000