BUSN 380 Problem Set 1indigo11
TCO 1 Time value of money relationships & applications; opportunity costs; personal financial statements - Problem Set 1
- Ben Collins plans to buy a house for $65,000. If that real estate property is expected to increase in value 5 percent each year, what would its approximate value be seven years from now?
- At an annual interest rate of five percent, how long would it take for your savings to double?
- In the mid-1990s, selected automobiles had an average cost of $12,000. The average cost of those same motor vehicles is now $20,000. What was the rate of increase for this item between the two time periods?
- A family spends $28,000 a year for living expenses. If prices increase by 4 percent a year for the next three years, what amount will the family need for its living expenses?
- What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?
- Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return? Assumes she can earn 3 percent on her savings.
7. Tran Lee plans to set aside $1,800 a year for the next six years, earning 4 percent. What would be the future value of this savings amount?
8. If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the next five years, what would be the amount of each payment? (Note: Use the present value of an annuity table in the Chapter Appendix.)
9. Based on the following data, compute the total assets, total liabilities, and net worth.
Liquid assets, $3,670 Household assets, $89,890
Investment assets, $8,340 Long-term liabilities, $76,230
Current liabilities, $2,670
10. Which of the following employee benefits has the greater value? Use the formula given in the “Financial Planning Calculations” box on page 56 to compare these benefits. (Assume a 28 percent tax rate.)
A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325.
- 8 years ago
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