Question

1) Cheryl wants to have ​$3500 in spending money to take on a trip to Disney World in three years. How much must she deposit now in a savings account that pays 5​% per year to have the money she needs in three​ years? To have ​$3500 in three​ years, Cheryl would need to deposit ​$ ?

2)How much will you have in 36 months if you invest ​$77 a month at 12​% annual​ interest? In 36 ​months, you will have ​?

3)Jen spends ​$7 per week on lottery tickets. If she takes the same amount that she spends on lottery tickets and invests it each week for the next five years at 11​%, compounded​ weekly, how much will she have in five​ years? In five​ years, Jen will have ​?

4)Winners of the Georgia Lotto drawing are given the choice of receiving the winning amount divided equally over 22 years or as a​ lump-sum cash option amount. The cash option amount is determined by discounting the annual winning payment at 9​% over 22 years. This week the lottery is worth ​$19 million to a single winner. What would the cash option payout​ be? The cash option payout would be ?

5)Amy and Vince want to save ​$5000 so that they can take a trip to Europe in four years. How much must they save each month to have the money they need if they can get 7​%, compounded​ monthly, on their​ savings? The amount Amy and Vince will need to save each month is ?

6)Jim accepted a ​$2000 loan from his uncle Kurt. Uncle Kurt agreed to defer payments for two years until after Jim graduates from college. How much will Jim owe in two years if his uncle charges him 4​% interest compounded​ annually? In two years Jim will owe ​?

Answer 1

(1)

Required deposit ($) = Future value / (1 + Interest rate)^{Number of years} = 3,500 / (1.05)³ = 3,500 / 1.1576 = 3,023.50

(2)

Monthly interest rate = 12%/12 = 1%

Future value ($) = Monthly deposit x F/A(r%, N) = 77 x F/A(1%, 36) = 77 x 43.0769 = 3,316.92

NOTE: As per Answering Policy, 1st question is answered.