- When a small child, Derekâs grandfather established a trust fund for him to receive $20,000 on his thirty-fifth birthday. (Any earnings beyond $20,000 reverted to his grandfather.) Derek just turned 23. What is the value of his trust today if the trust fund earns 7 percent interest? What is the present value if he had to wait until age 40 to receive the money?
- You and 11 coworkers just won $12 million from the state lottery. Assuming you each receive your share over 20 years and that he state lottery earns a 5.5 percent return on its funds, what is the present value of your prize before taxes if you request the âup-front cashâ option?
- Four years ago, you began contributing to an employer 401(K) plan that is now worth $5,000. If you deposit $3,000 a year and your employer matches 50 percent of your contribution for the next 15 years, how much will the account be worth assuming an 8 percent average annual return?
- When a small child, Derekâs grandfather established a trust fund for him to receive $20,000 on his thirty-fifth birthday. (Any earnings beyond $20,000 reverted to his grandfather.) Derek just turned 23. What is the value of his trust today if the trust fund earns 7 percent interest? What is the present value if he had to wait until age 40 to receive the money?
- You and 11 coworkers just won $12 million from the state lottery. Assuming you each receive your share over 20 years and that he state lottery earns a 5.5 percent return on its funds, what is the present value of your prize before taxes if you request the âup-front cashâ option?
- Four years ago, you began contributing to an employer 401(K) plan that is now worth $5,000. If you deposit $3,000 a year and your employer matches 50 percent of your contribution for the next 15 years, how much will the account be worth assuming an 8 percent average annual return?
Related questions
**Please show your work.
1) Phil can afford $160 a month for 5 years for a car loan. If the interest rate is 4.4 percent compounded monthly, how much can he afford to borrow to purchase a car?
| $7,707.28 | |
| $8,448.00 | |
| $8,603.27 | |
| $8,775.33 | |
| $9,600.00 |
2) Atlas Insurance wants to sell you an annuity which will pay you $550 per quarter for 25 years. You want to earn a minimum rate of return of 5.0 percent compounded quarterly. What is the most you are willing to pay as a lump sum today to buy this annuity?
rev: 10_28_2013_QC_37913
| $28,778.49 | |
| $31,295.74 | |
| $31,006.68 | |
| $30,319.28 | |
| $29,735.24 |
3) What is the present value of $14,150 to be received 3 years from today if the discount rate is 5.75 percent?
| $11,846.79 | |
| $11,845.42 | |
| $11,965.07 | |
| $7,382.61 | |
| $12,653.06 |
4) The interest rate expressed as if it were compounded once per year is called the _____ rate.
| stated interest | |
| compound interest | |
| effective annual | |
| periodic interest | |
| daily interest |
5) Wicker Imports established a trust fund that provides $171,700 in scholarships each year for needy students. The trust fund earns a 4.00 percent rate of return. How much money did the firm contribute to the fund assuming that only the interest income is distributed?
| $4,039,757.60 | |
| $4,292,500.00 | |
| $3,434,000.00 | |
| $6,868,000.00 | |
| $5,151,000.00 |
