Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago

Mr. Darden is selling his house for $200,000. He bought it for $164,000 ten years ago. What is the annual return on his investment?

A. 2%
B. Between 3% and 5%
C. 10%
D. None of these

PVIF = PV (App. B: 10 periods)
FV
= $164,000 = 0.82 Return = 2%
$200,000

Increasing the number of periods will increase all of the following except

A. the present value of an annuity.
B. the present value of $1.
C. the future value of $1.
D. the future value of an annuity.

Joe Nautilus has $210,000 and wants to retire. What return must his money earn so he may receive annual benefits of $30,000 for the next 10 years.

A. 12%
B. Between 12% and 13%
C. About 7%
D. Greater than 15%

PVIFA = PVA (App. D: 10 periods)
A
= $210,000 = 7.0 Return = 7%
$30,000

You will deposit $2,000 today. It will grow for 6 years at 10% interest compounded semiannually. You will then withdraw the funds annually over the next 4 years. The annual interest rate is 8%. Your annual withdrawal will be:

A. $2,340
B. $4,332
C. $797
D. $1,085

FV = PV x FV_IF (App. A: 5%, 12 periods)
= $2,000 x 1.796 = $3,592
A = PVA (App. D: 8%, 4 periods)
PVIFA
= $3,592 = $1,085
3.312