3. If you open an individual retirement account (IRA) at a commercial bank and d

Question

3.        If you open an individual retirement account (IRA) at a commercial bank and deposit $1,000 in the account per year, how much will be in the account after 20 years if the funds earn 7% annually?

4.        If you invest $ 10,000 today at 6.25% interest compounded annually, how much is your investment worth in 35 years?

5.        You borrow $100,000 to buy a house; if the annual interest rate is 6% and the term of the loan is 20 years.

                  a) What is the annual payment required to retire the mortgage loan?

                  b) What is the monthly payment assuming interest is computing using monthly

                       compounding?

                  c) How much less interest will you pay by making monthly payments over annual

                       payments?

6.       The Big-Sox currently have 30,000 spectators per game and anticipate annual growth in attendance of 9%. If the Big Stadium holds 65,000 people, how long will it take for the team reach capacity?

7.       You bought a Picasso for $50,000 and sold it after 5 years for $88,000. What was the annual return on the investment?

8.     What is the expected return on a stock if the firm will earn 24% during a period of economic boom, 14% during normal economic periods, and 2% during a period of recession if the probabilities of these economic environments are 20%, 65%, and 15%, respectively?

Expected return=

9.        What is the required return using the capital asset pricing model if a stock's beta is 1.2 and the individual, who expects the market to rise by 11.2%, can earn 4.4% invested in a risk-free Treasury bill?

Required rate of return

10.        Your broker recommends that you purchase Good Mills at $30. The stock pays a $2.20 annual dividend, which (like its per share earnings) is expected to grow annually at 8 percent. If you want to earn 15 percent on your funds, is this stock a good buy?

This should be listed as%u201D for each question. 1-7

Rate          Nper          Pmt         PV         FV

Explanation / Answer

Listed in this order: N, Interest Rate, PV, PMT, FV and answer 3. 20, 7, -1,000, -1,000, ? (solve for FV)= 44,865.1768 4. 35, 6.25, -10,000, 0, ?= 83,466.6254 5. part A- 20, 6, -100,000, ?, 0= 8,718.4557 (solve for PMT) Part B- 240, 6, -100,000, ?, 0= 5,266.65 (12 months*20yrs=240) Part C- Not so in this situation...the compounding of interest monthly instead of annually is not going to save you money 6. ?, 9, -30,000, 0, 65,000= 8.972 years (solve for Number) 7. 5, ?, -50,000, 0, 88,000= 11.9702%

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